Amid crisis, E.U. leaders feud over small change

BRUSSELS — If European officials were accused of lacking ambition last November, when they first suggested spending €5 billion to kick start the economy of the world’s largest trading bloc, their impasse four months later over the plan has become a symbol of a weak and divided response to the global financial crisis.

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In a bleak economic climate, a meeting of leaders of the 27 countries of the European Union on Thursday and Friday was supposed to reassure nervous voters and markets.

Instead, the gathering in Brussels will be dominated by disputes over the €5 billion, or $6.7 billion, earmarked for new European power links, carbon capture and storage projects, offshore wind farms and expanded broadband networks.

Compared to the United States, where the Obama administration swiftly pushed through a stimulus package of $787 billion, Europe seems to be floundering.

Once happy to encourage European Union spending, Germany the bloc’s largest contributor is seeking to apply the brakes, complaining that several projects in the package lack impact.

A compromise deal will probably be struck, but the discussions to get there threaten to showcase many of the Union’s trademark vices: slow decision-making, fighting between national capitals and susceptibility to pork-barrel politics.

The standoff illustrates an inability to overcome national differences even in acute crisis, said Daniel Gros of the Center for European Policy Studies, a research organization that is based in Brussels.

«It is because of a national perspective, which was decided upon at the beginning of the crisis,» Gros said. «That was a strategic mistake. The thinking was: the money is in the hands of the member states and that is why we have to have national approaches.»

The result, he said, has been «uncoordinated national rescue packages and uncoordinated national fiscal packages.»

Separately, European governments have announced individual recovery plans worth hundreds of billions of euros. Officials say they add up to 3.3 percent of gross domestic product when «automatic stabilizers» such as extra spending on social security in times of hardship are counted.

But, as a bloc, the E.U. struggles to agree on even a fraction of that.

While the bloc has an annual budget of around €115 billion, almost all this spending is earmarked long in advance. In fact the €5 billion at issue is money that was left unspent and would normally return to national coffers.

But to spend it all, leaders must agree. If they stumble, said Graham Watson, leader of the Liberal Group in the European Parliament, the bloc’s credibility will be damaged. The E.U. is «failing to think and act as one,» he said, when taxpayers expect action.

Watson’s colleague, Anne Jensen, who speaks for the same liberal group on budget issues, deplored what she called «undignified horse-trading» between member nations over which projects might be approved, ranging from a gas transmission system linking Slovenia to Austria to an offshore wind farm near Aberdeen in Scotland.

With classic Brussels understatement, one E.U. official insisting on anonymity because of the sensitivities involved conceded that the intense horse-trading had made the negotiation tortuous. «The Bulgarians wanted and got more,» he said, «and the Italians and French then asked for more. When they got it, that led Spain and Portugal to complain because it meant them receiving less.»

Other obstacles include a disagreement over which years of the E.U. budget, between 2008 and 2010, should be raided for the cash.

But the most difficult blockage has come from Germany which, because of its high contributions to the E.U. budget, wants to restrict spending.

Berlin has sought to remove any money for the Nabucco gas pipeline project, which is sponsored by the E.U. and is designed to reduce European dependence on Russian natural gas by connecting the Caspian region, the Middle East and Egypt to Europe via Turkey, Bulgaria, Romania, Hungary and Austria.

Chancellor Angela Merkel of Germany said this month that the project was sufficiently financed in the near term and needed no more cash. Some critics say the Germans have little interest in spending on a project that would compete with Nord Stream, a gas pipeline directly linking Russia and Germany via the Baltic.

Meanwhile, Germany opposes proposals to finance broadband expansion in rural areas. Foreign Minister Frank-Walter Steinmeier has suggested that a regulatory holiday for telecommunications companies would get the job done more cheaply.

Although the odds are that a deal will emerge, an opportunity has been lost. «The E.U. should not be haggling over these small sums,» Gros said. «It should be thinking strategically what to do for Eastern Europe, for the E.U.’s banks and for its recovery measures. There is no shortage of big themes.»

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DEL