Paudge Connolly (Cavan-Monaghan, Independent)

In one of the shortest EU summits on record in March this year, which lasted for a total of five hours, the EU leaders agreed to give governments considerably more latitude to spend their way out of recessions. With a somewhat fetching display of Dutch courage, they also backtracked on plans to liberalise the EU's internal trade and services. They demonstrated a lack of bottle to take the necessary steps to boost the EU's sluggish economy. A sense of poetic justice pervaded the summit, particularly in regard to Germany which helped to push through the EU Stability and Growth Pact in 1997. The pact was an attempt to deter profligate neighbours from attempting to freeload on Germany's credit rating under the unified euro currency. It placed very tight restrictions on countries' borrowing deficits of no more than 3% of gross domestic product, GDP, and a total national debt of no more than 60% as a condition of joining the euro.

In the meantime, Germany has proceeded to treat its own proposed restrictions in a somewhat cavalier fashion, having breached the pact's deficit criteria for three years running, and it looks set for a repeat performance this year. Having been strongly lobbied by the German Government prior to the Brussels summit, EU finance ministers agreed to revise the Stability and Growth Pact, effectively rendering it toothless. Its stringent criteria have been relaxed, with finance ministers simply urged to keep deficits close to their reference value. In a period of severe economic downturn where countries could exceed the deficit limits and the previous strict standard of 3% of GDP, any period of negative growth or protracted period of low growth will suffice.

New rules approved and rubber-stamped by Heads of Government allow for all types of temporary spending in advancing European policy goals. They also include fostering international solidarity, which sounds like funding for international peacekeeping activities. Allowances were also made for the continuing cost involved in German unification, estimated at 4% of national GDP. The Austrian finance minister was somewhat caustic in his reference to the concession to Germany that, since the wall came down 15 years ago, it was hardly a temporary emergency.

Five years ago, the Lisbon Agenda reform programme was advanced with the objective of making the EU the most competitive economy by 2010. It is something of a gesture or a nudge rather than a directive. It is left up to individual governments to implement. Fearing opposition from powerful vested interest groups, they have largely been reluctant to do so. There is much talk about Lisbon but little or no concrete action. There was an attempt to raise the issue of a proposed services directive with a view to liberalising EU internal trade and services. This was an attempt to mollify French and German concerns regarding the question of social dumping and competition from companies in poorer countries with lower wages and taxes. However, this service directive is not exactly flavour of the month in France where it is already threatening the outcome of the referendum on the EU constitution, which would be a huge setback for one of the EU's founder nations.

The summit did not achieve very much other than to dilute the Stability and Growth Pact. It shied away from any attempt to make the Community more competitive or pushing EU growth towards American levels. The next pricing matter will be the agreement on the budget for the period 2007 to 2013, with Britain's rebate already proving controversial. This issue, which was worth €2.5 billion last year, was negotiated by Margaret Thatcher in 1984 as compensation for Britain getting relatively little under the Common Agricultural Policy. It appears as if real economic reform will again take a back seat without a change of heart from some older members.

On Croatia's application to join the EU, I am happy to note that Ireland was one of the countries that voted against the proposal to defer the accession talks with Croatia.

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