Commitment to EU must transcend grants mentality

The launch of economic and monetary union on Friday marks the start of what will surely be the decisive phase of European integration. The responsibility of running a single currency will involve the 11 EU participants in a more ambitious degree of sovereignty-sharing than anything attempted since the genesis of the European Union 41 years ago.

But this is just one of the daunting challenges facing the EU over the next 12 months. During 1999 the Union's member-states will finally have to decide whether they are serious about enlargement to the east and to the Mediterranean. For enlargement to happen in the next decade, the present 15 EU member-states will have no later than the spring to agree on Agenda 2000, the far-reaching package of budget and spending reforms. These are essential for the Union to be able to absorb any new members.

Starting in 2000 there will also have to be agreement on further reforms of the EU decision-making institutions. Otherwise eventual expansion to perhaps 30 or more member-states in the years ahead will lead to political paralysis and implosion. The coming months will also determine whether the EU is capable of matching its enormous global economic influence with a common foreign, security and defence policy worthy of the name.

In what is, economically and politically, an ever more unstable world, the EU is having to grow up rather more quickly than national political leaders had either expected or had planned for. Will the emerging European political union produce a political leadership capable of matching these times?

How grown up is the relationship of its member-states, including the Republic, to the Union? This State enjoys an extraordinary status in the EU. It invariably heads the popularity polls when people throughout the EU are asked for their opinion of other member-states. The dramatic arrival of the Celtic Tiger on the world economic scene has helped generate an international image of a self-confident, modern country.

The Republic is widely seen as deeply committed to the construction of the Union. Moreover, the Northern Ireland peace process is celebrated internationally, not least for the way the Republic has been able to come to terms with its historical traumas. Many see this as an example which other European countries could follow with profit.

But how much does all of this tell us about underlying Irish attitudes to closer European integration? The reality may be rather less romantic and idealistic. A pervasive immaturity permeates much of official Ireland's strategy towards the EU at present. A certain ambiguity also marks official attitudes towards the next stages of European integration.

The absence of any serious political debate in the Republic about the evolution of the EU in the new millennium is striking. Without a more honest and informed public debate about sensitive issues such as EU taxation, enlargement, foreign, security and defence policy, sections of public opinion and the Irish political class could all too easily be drawn towards a backward-looking insularity. Just how damaging such a reversion could be can be measured by looking at what Thatcherite Europhobia has done to Britain during the past 20 years.

Is this too harsh a judgment? I think not. Take the issue of regionalism. To date this issue has been debated almost exclusively in terms of whether or not it will allow the maximum exploitation of EU development funds. Of course, this matters. But the general move to greater Europe regional self-government is about much more than how to squeeze the most out of the (all too limited) Brussels budget kitty.

The emergence of the European regions is primarily about better and more democratically accountable governance on the eve of the 21st century (ask the Scots). We are witnessing a slow deconstruction of the centralised, 19th-century, European nation-states as they shed power and political functions both upwards to the EU (and eventually to global institutions) and downwards to regions and local communities.

Irish Government strategy on other contentious EU issues such as the proposed abolition of duty-free allowances and (more importantly) company taxation seems to be shaped by short-term, populist pressures. The grotesque campaign to reverse the unanimous EU decision to abolish duty-free shopping is a case in point. If there is money for tax or duty allowances why should it go to those who can afford international travel (especially in what is meant to be a border-free Europe) rather than to the unemployed or the poor?

The Irish contribution to the wider debate about EU tax policy has been depressingly introverted. It ignores the fact that the more successful the Celtic Tiger the less it can simultaneously expect large aid transfers from other (more highly taxed) EU countries while undercutting them in the race to attract foreign investment with absurdly low tax rates.

Many important multinationals established in Ireland dismiss suggestions that they are here solely for the tax breaks as patronising and ill-informed. They insist that the educational skills of a young and adaptable work force are far more important.

Too little attention has so far focused in the Republic on why there is an EU tax debate at all. In his report earlier this year Commissioner Mario Monti pointed out that tax-cutting competition between member-states has produced alarming results. It has encouraged an unsustainable and socially intolerable shift in the burden of tax from capital to labour.

It has also led to a haemorrhaging of revenue from national exchequers. Some may not worry about this. But as our societies are forced to invest ever more in the development of human capital to meet the challenge of full employment in a rapidly changing economy, the shrinking of the tax base could have disastrous consequences.

The preparations for the enlargement of the EU to central and eastern Europe will mean a potentially painful refocusing of EU structural funds. The near-unanimous aversion of EU governments to increasing the Union's budget for 2000-2006 is ill advised. But over the next decade - given the prospect of faster-than-average economic growth in the Republic - this State must expect to gradually become a net contributor to rather than a net beneficiary of the EU budget.

It is possible that the Republic's Government, in alliance with others, could halt or at least dramatically slow down this process. The result would be that the promised opening up of the EU to the new democracies in the east as well as to Cyprus and Malta might be seriously delayed.

Some Irish politicians seem willing to live with that prospect. But the longer the candidate countries are kept waiting - as is the case with so many supplicants - at the doors of the EU, the more likely there will be a popular backlash against the very goal of European integration in these countries.

The cause of democracy and reform in central and eastern Europe is intimately linked with those countries' mission for EU membership. If this is frustrated, the risk of regression and instability in the region cannot be ignored. A return to instability and potential conflict on our borders could prove more expensive than the costs of EU enlargement.

Meanwhile the Republic's stance towards another key aspect of future EU development - foreign, security and defence policy - remains unclear. The contrast between the EU as economic might and political dwarf is well known. The torpor, weakness and disarray shown by the EU during aggressive Serb and Croat onslaughts on the multi-ethnic republic of Bosnia helped cause the deaths of some 250,000 fellow Europeans. Surely the time has come for the EU to take greater responsibility for ensuring peace and stability on our continent.

For far too long the debate about full Irish participation in European security and defence has remained trapped in a bizarre Cold War time warp. The problem we face today, for example, in Kosovo, is no longer the confrontation of rival nuclear imperialisms but the reluctance of the international community to use force in legitimate defence of defenceless peoples.

Some say "Well, let's leave that to NATO." But why should we rely on American implementation of what are European peace-making or peacekeeping responsibilities? There may also be differences of interest or of policy between EU countries and the US, as has been reflected during the recent Anglo-American bombing of Iraq.

The Republic's legion of friends throughout the EU want it to play an active part in the next crucial phase of European integration. But that means viewing the European project in its full political maturity rather than in adolescent terms as merely a handy grant-giving machine.

John Palmer is director of the European Policy Centre in Brussels. He was formerly European Editor of the Guardian