Money matters

Until a couple of weeks ago, there were three main items for this week’s European summit: the future of the Lisbon treaty, climate change and energy security, and relations with Russia and Georgia.

But as one senior EU official put it eight days before Europe’s leaders meet in Brussels on Wednesday: “There are three issues on the agenda: financial crisis, financial crisis, financial crisis.”

The seismic shocks which are battering the banking sector are forcing governments to spend all their energy, ingenuity and large amounts of financial capital in shoring up confidence in the financial sector in general. What state the sector will be in at the time of the summit is far from clear, given the speed with which events are unfolding every day.

“We might still be putting out the fire, or have put it out and be assessing the damage, or managing to focus on the reconstruction that will be needed. No one knows,” admitted one official. What is clear is that, unusually for a summit, the leaders will be reacting to events in real time.

The one unadulterated message that all participants will want to emerge from the meeting is that the EU remains united and that the different national responses being given to the particular circumstances in each country are taking place in a coordinated EU framework.

That has consistently been the impression that the European commission has tried to give. But the lack of warning from the Irish government of its bank guarantee scheme, and the measures which Germany took just 24 hours after French president Nicolas Sarkozy’s mini summit in Paris, have cast doubt on that unity and coordination.

However, the fact that all the leaders will be in the same room for the first time since the run began on Europe’s banks will present a picture of solidarity. As French European affairs minister Jean-Pierre Jouyet told the European parliament last week, “The financial and economic situation will dominate the work of the European council, and the French presidency is leaving no stone unturned to improve the coordination and coherence of national institutions.”

The summit will also give commission president José Manuel Barroso an opportunity to spell out the measures he and his colleagues are putting together. In addition to the changes to Europe’s capital requirements legislation announced earlier this month, which will increase supervision of the continent’s banks, he is expected to give a flavour of the commission’s proposals to regulate credit rating agencies and curb excessive executive pay.

Socialist leaders are also likely to give their backing to the parliament’s recent overwhelming support for legislation to cover the activities of hedge funds and private equity. While internal market commissioner Charlie McCreevy is resisting MEPs’ demands, it may be made clear to Barroso, who is understood to be keen to serve a second five-year term as president and needs governmental support for that ambition, that action in this area is unavoidable.

If that proves to be the case, the parliament will enjoy the success of seeing a policy it developed on its own initiative, and which was championed by former Danish Socialist prime minister Poul Nyrup Rasmussen, finally make it on to the statute book.

While acknowledging that the French presidency was in the business of crisis management, Jouyet told MEPs: “We are not giving up our priorities. We still have ambitions.”

As a result, the summit will consider the fate of the Lisbon treaty. But what had originally been billed as a substantial item for discussion will now take up little time. Irish premier Brian Cowen will give a short factual presentation of why his government believes the country’s electorate voted no, but will not offer any way out of the impasse. That might become clearer with the roadmap expected to be adopted at the December summit.

Informally, leaders may begin to sketch out the scenario of what happens to the parliament and the commission if a second Irish referendum on the treaty, as now seems likely, does not take place until after the June European elections. In that case, the parliament is expected to be voted into office on the basis of the Nice treaty, meaning fewer MEPs than now.

However, to avoid any country losing a commissioner, as the Nice treaty requires, there may be moves to extend the mandate of the current commission by a few months in the hope that a second referendum would approve Lisbon, paving the way for each member state to have a member in the college.

The summit will provide further impetus to the EU’s ambitious energy and climate change strategy, emphasising that this should not be blown off course by current events.

Attention will also be given to the EU’s relations with Russia, and if, as appears the case, Moscow honours the commitments it made in the Georgian peace agreement, the leaders will give their blessing to renewing negotiations on a new partnership agreement.