I Don’t often post much on the subject of Europe but thought I would repost here my comments from a debate at Samizdata on Blair’s offer of concessions on the UK’s rebate.

The basic hypothesis here is that there may be more to Blair’s offer of concessions than first meets the eye.

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Right now, Blair is in a major bind.

The UK presidency has achieved nothing, less than nothing in fact as we’re further away from any agreement on the budget now than we were when he took over the role.

He was also completely outmanouvered by Chirac and Schroeder on the budget when they succeeding in shifting attention on to the rebate and away from reforming CAP and liberalising the internal service sector market which is what Blair seems to want.

The way in which the rebate is calculated and paid means that, on paper at least, the accession countries of Eastern Europe, will join the rest of EU in paying into the pot that funds the rebate which, naturally, is pissing them off a fair bit as they’re piss poor broke and desperately in need of structural funds to investing in business, etc.

What Blair appears to be doing in offering to waive that portion of the rebate which would come from the accession states in return for a cut in their expected structural funds - which is meaningless as only Portugal has ever come close to spending their full allocation and then only for one year - typically there’s a routine 15-20% underspend on structural funs due to the way they are paid as national governments have to provide 50% match funding to release them.

In return what Blair hopes to get, I think, is the full support of the accession countries for his other reforms on CAP and market deregulation. From what I understand, only Poland, which has a large agricultural sector, may be difficult as they stand to gain heavily from CAP. Other states which are focussed more on industrial and service sector development should fall in behind Blair quite readily as they see market liberalisation as the key to inflating their economies on the back rapid economic growth.

So - Blair offers a concession on the rebate, but if he’s smart it’ll be a ringfenced deal from which only the accession countries will benefit - existing member states will stil make their usual contributions.

Next he ups the ante on reform of CAP and market deregulation, knowing he has the backing of the accession states and throws the ball back into Chirac’s court.

Chirac now faces two choices - either he makes the deal and gets a hammering at home or he sticks to his guns on CAP, etc. and it all falls through.

If Chirac capitulates, Blair takes a modest hit from the Mail/Express - which would happen if he gave the EU a fiver back let alone £1 billion.

As for Murdoch and the Sun, who knows where they’ll go? Murdoch is a eurosceptic, true, but then think?

Won’t deregulation of service sector markets also work in his favour by creating conditions which allow him to expand the News International empire into the new markets in Eastern Europe?

Check the press today - the Express are leading on the rebate, the Sun have one column on an inside page and the Times are talking up the importance of keeping ‘New Europe’ onside as being more important than the rebate.

Blair may get a bit of a kicking on the rebate but not as big as some clearly think and not from where, in the media, he’ll see it as mattering most - and any, it’s not like he’ll have to worry about going to the country again for a mandate.

Sudden a lose-lose scenario becomes a win-win.

Chirac folds and Blair gets the reforms he’s after and the gratitude of the accession countries who stand to gain most from inward investment arising from deregulation and he gets to see Chirac take a beating from his own press.

Chirac sticks to his guns and Blair can claim that he tries to be reasonable and make concessions only for the Frence to screw over the deal out of naked self-interest, which means he gets to turn the tables on Chirac and make him the villain, keep the backing of the accession states and keep the rebate.

Meanwhile, the Mail, Express and Sun can get back to their favourite pastime of blaming the French for everything and Blair’s off the hook.

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