A BICYCLE BUILT FOR 20:

No gain yet, but plenty of pain. No wonder Europeans are voting 'no' (Mary Ann Sieghart, 3/09/05)

AT A conference about Europe on Monday, a Dutch politician stood up and expressed her Government’s fears. “We haven’t had a referendum in Holland for 200 years. Our people have never been asked what they thought of Europe. Now we’re finally giving them the chance to tell us, and we might not like what they say.”

The Netherlands, like nine other EU countries, is holding a referendum on the proposed new constitution. You might have thought that this country, a founder member of the EU, would be bound to vote “yes”. In fact, the contest looks set to be very close. And the result may have little to do with the constitution itself.

What angers the Dutch about Europe is the possibility of Turkey joining the EU, and the brazen breaching of the Stability and Growth Pact by bigger countries such as Germany, France and Italy. Yesterday, EU finance ministers failed to reach agreement on reform of the pact, which restricts how much member states can borrow. The Dutch don’t see why countries that have had to go through painful reforms to meet the pact’s strict conditions should make allowances for other member states who have not been brave enough to do so. [...]

Yesterday Gordon Brown was furious about the prospect of the Commission having more power over member states’ finances. “It is vital,” he said, “that member states retain ownership of their own fiscal policies. It’s not Britain that has been failing the stability pact; it’s actually the stability pact that has been failing Britain.”

Luckily, as Britain is outside the eurozone, the Commission has no power to fine us for any breach of the pact. But yesterday’s shenanigans in Brussels reminded me of the cartoons drawn by Gus O’Donnell, the Treasury official in charge of the assessment of whether Britain should join the euro. To illustrate the drawbacks of the euro, he drew one tandem with Sir Edward George, then Governor of the Bank of England, happily steering in front and Mr Brown pedalling behind. Desperately trying to steer a second tandem was Wim Duisenberg, then Governor of the European Central Bank, with 12 eurozone finance ministers attempting to climb on the back.

One of his points was that, if a British chancellor takes the right fiscal and structural decisions about the economy, then the Bank of England will reward the measures with lower interest rates. In the eurozone, by contrast, a member state can be as good as gold, but win no recognition from the ECB because of the antics of less responsible countries.

The same problem arises over the so-called Lisbon reforms, which were supposed to make Europe “the most competitive and dynamic knowledge-based economy in the world” by 2010. EU leaders meet this month to assess their so far pretty dismal progress at the halfway mark. Far from turning into a sleek, streamlined growth machine, the EU has been watching with dismay as the US has streaked into the distance and India and China have zoomed up on the inside lane. According to Wim Kok, the former Dutch Prime Minister who wrote a report on the Lisbon process last year, the plan risks becoming “a synonym for missed objectives and failed promises”. And since the euro was introduced, progress towards the Lisbon objectives in the eurozone has stalled, not accelerated.