Archives for December 2008

For the European project's enthusiasts 2008 has been a good year.

The European Union has extended its reach in foreign affairs. It brokered a ceasefire during the Georgian crisis and held a common position despite deep and obvious divisions between the 27 towards Russia.

The mission to Kosovo eventually got off the ground.

There's even an EU battle fleet on its way to African waters to deal with the pirates.

Despite the financial crisis the euro has weathered the storm better than the pound.
After a few false starts and the occasionally conspicuous absence of Germany there is agreement on a coordinated plan to stimulate the economy.

Countries are still queuing up to join the organisation. Iceland became a surprise new contender for membership. The most important country in the Balkans, Serbia, chose the EU and the West in elections that were widely seen as a referendum on its future orientation.

Just before Christmas national leaders and the European Parliament backed what has become a flagship plan, to cut greenhouse gases. True, it was much watered down in the teeth of the recession, but it still puts the EU well ahead of the rest of the international pack.

And yet, and yet.

The past year was perhaps even better for those who despise, distrust or just aren't totally convinced about the European project. No need here for a long list. One date.

On 13 June the Irish people rejected the Lisbon Treaty. This was unlucky for some. At that time the Irish government was rather popular and the vote clearly wasn't on domestic issues. So it was clearly a rejection of the treaty itself, or the EU as a whole. But the Irish government claims the rejection was the result of specific fears about the practical effect of the treaty.

The EU's national and commission leaders managed not to have their greater project, of trying to do things that are relevant to people all over Europe, derailed by this blow. They put it on the back burner, knowing it would cook away on its own.

By December the leaders of EU countries and the commission had decided that Ireland should vote again. Actually most of them will have decided that, in the privacy of their own heads, within hours of the result. I was, at the time, far too hasty in declaring Lisbon dead. It's not that I am insufficiently cynical. I just didn't think a second referendum would be winnable, and therefore didn't see it as a viable political option. It still seems to me a huge gamble.

Lisbon was of course the treaty that rose from the ashes of the European Constitution which had been burnt to death by the Dutch and French people. To many the two documents looked suspiciously alike.

I am not quite sure who first used the phrase "They don't know the meaning of the word 'No'" in relation to the EU's plans for treaty reform, but it was a stroke of brilliance. It sticks in people's minds and strikes a chord. In political speak, it resonates. It was quite clear before and after the constitution that most national leaders feared referendums because they thought they would lose them.

The behaviour over the treaties gives the impression the European project is an unstoppable juggernaut. A few bodies in the way might slow it down, but not significantly alter its path, let alone stop it in its tracks.

Few of us will really think the Lisbon Treaty is the biggest issue of 2009, but the second Irish referendum, planned for the autumn, will be an important moment for the EU. If the Irish people back it, it will be the end of the story of institutional change for a while, but it will have done nothing to endear the EU to the people who live within its borders. A second rejection would mean hard choices for those in power. What would they do? Abandon the thing they say is so necessary? Introduce it by the back door or in some way, impossible to imagine at the moment, move on without Ireland? Who will find 2009 a good year in the EU?

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Europe's carmakers want more money, in part to cope with a brand new EU law.

The day after the European Parliament voted for new rules to govern the amount of carbon dioxide (CO2) cars can emit, the car manufacturers say they need a loan of 40bn euros (£38bn).

The boss of the European Automobile Manufacturers' Association (ACEA), Ivan Hodac, says: "It will cost us an enormous amount of money, it is absolutely sure the cars will become more expensive, so the consumer will have to pay part of the bill and part of the bill will have to come from the companies.

"We have asked for a soft loan from the European Investment Bank because at this moment the industry is doing very badly and it will be very, very difficult to get the money to invest in the fuel-efficient technologies to meet the target."

As I reported a while ago, after intensive negotiation between ministers and MEPs a set of rules has been agreed, and the parliament formally voted on them on Wednesday. Campaigners like Jos Dings from Transport and Environment feel they've been watered down. He told me "carmakers in each European country have been lobbying very hard so their governments get loopholes that suited them best. The Germans wanted exemptions for big cars, the Italians wanted exemptions for Fiat, the Brits for Aston Martin and Jaguar and if you count all the loopholes together it's a Swiss cheese, with lots of air and no cheese."

As I have covered this story in some depth I have wondered why car manufacturers don't see a huge commercial advantage in being ahead of the game and producing the car of tomorrow today. The short answer appears to be that people don't want to buy them.

A couple of weeks ago I drove a special prototype Peugeot 408 round the Arc de Triomphe in Paris. It's a hybrid diesel and electric and looks just like the ordinary model.

It's a strange drive at first, just because there's no noise. In fact I though I couldn't get the engine going at first, because I couldn't hear anything. The idea is that below a certain speed - and you are always below 30km/h (19mph) in central Paris - the electric engine kicks in and the diesel cuts out. The electric battery is constantly recharged when you brake. It produces about 90g of CO2 per kilometre driven, so it's well below the targets the EU is aiming for in seven years' time.

So why not now, and why not in all cars? The Scientific Director of PSA Peugeot Citroen, Jean-Pierre Goedgebuer, was frank with me. "It's still very costly, and so on the typical vehicle we are afraid there is no market. So first we aim at putting on the market premium or distinctive cars equipped with that technology."

He wouldn't tell me the exact extra cost, but when my guess went up from £1,000 to £4,000 he suggested I was around the right area. For smaller cars I think it would be much less, but the answer to my question "why not put this technology in an ordinary family car?" was obvious. "We're afraid, we're still afraid it's too expensive."

In the end I suspect it will be oil prices and scarcity, not new laws or guilty feelings about the environment, that will force us to adopt different technology.

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MEPs have voted overwhelmingly to scrap Britain's opt-out from the 48-hour week in three years' time.

But it doesn't mean for certain that people will be stopped from working more than an average of 48 hours a week from 2011.

What happens now? Britain certainly doesn't lose its opt-out straight away. There'll be talks between MEPs and ministers from the European Union's 27 countries aimed at finding a compromise. In theory, if the ministers refuse to budge the status quo stands and Britain keeps its opt-out.

But there will be intense pressure to negotiate a solution. The European Court of Justice has ruled that doctors' on-call time should be part of the 48-hour week if they have to sleep over at a hospital.

France, Germany, Hungary, Luxembourg, the Netherlands, Poland, Slovakia, Slovenia, and Spain all have their own opt-outs about on-call time and they will be eager to find a solution. That probably means a negotiated solution that, from the British government's point of view, is worse than the current position.

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When MEPs' fingers hover above their voting buttons today other fingers in Downing Street will be crossed.

Gordon Brown risks a humiliating defeat at the hands of Labour members of the European Parliament, many of whom want to make sure that people in Britain don't work more than 48 hours a week. It's all the more embarrassing for Mr Brown that the Conservatives and the Lib Dems are backing his government's position.

The parliament in Strasbourg will vote today on a proposal to get rid of Britain's 15-year-old opt-out from the Working Time Directive. The Confederation of British Industry (CBI) says more than three million people would be stopped working overtime if the opt-out goes. Open Europe, a think-tank that is very critical of the EU, claims it would cost Britain around £60bn by 2020: an average of £2,300 per household.

But Socialists say it's about being able to work to live, not live to work. They say there should be the same rules across the European Union because it's a common market and the opt-out gives Britain an unfair advantage.

The debate has already taken place, but the vote will be tight. The Labour group is split and so are two of the big political groupings. Apart from some Labour MEPs most of the Socialist group will vote to get rid of Britain's opt-out. The Labour MEP leading the rebellion, Stephen Hughes, says most workers want shorter hours.

Much, but not all of the centre-right, including the Tories, will vote to keep the opt-out. Their leader Philip Bushill-Matthews told the parliament that he recently met a Portuguese woman whose husband had lost his job and who had to work 12 hours a day, seven days a week. He asked "What hope do you offer her? Either, you say you can't do it, so you're going to have to give up one of your jobs, give up your children, your house. I was elected to look after the people I serve - until I stand down I will stand up for the people who elected me to help them, not to stand in their way."

The Independent MEP from Northern Ireland Jim Allister said he would "refute the right of this parliament of the attempt to rob my country of that entitlement. Control of working hours in my book is a matter exclusively for national control, not for Brussels dictate. If British workers are permitted by their own elected government to work more than 48 hours a week, then why should it matter to those from countries whose governments are more prescriptive? Frankly - it should be none of your business."

Most of the Liberal group, including the Lib Dems, will also vote to keep it, but the French and Italians may take a different view.

The Labour MEPs are split and some sound rather tortured about their decision. Formally they have a meeting at 0900 before the vote a couple of hours later, but I think many will do what they want to do, whatever the group decides as a whole. One told me it was one issue that was raised by people on the doorstep, who told them that they didn't want "Brussels" (or presumably, Strasbourg) interfering with their overtime. Another said he felt it was an issue like poverty pay in the 1970s and society had to move towards giving people a better balance between their work and their life.

Jean Lambert from the Greens said in the debate it was all about health and safety and that tired workers were dangerous workers. "If you are asking people to work long hours, be aware it's a problem - productivity and creativity goes down, which isn't good for a knowledge-based economy. And it certainly doesn't add a lot of quality to work-life balance for people who are too tired to read to their kids when they get home."

So if the MEPs vote against the British opt-out is that it? Overtime banned in Britain from tomorrow? Come off it, this is the European Union. The opt-out would go in 2012, but there's a lot of jaw-jaw before that happens. MEPs appointed by the parliament, rapporteurs in the jargon, would first negotiate with employment ministers from the EU's 27 countries. If they do a deal it is likely to be worse than the status quo, from the British government's point of view. But if British ministers and others won't budge that means it's back to the drawing board. As far as I can see that means Britain would keep the opt-out for a good while, although exactly what would emerge in the end is very uncertain.

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STRASBOURG 1330

President Sarkozy has called it an "outrage" and a "wound" that the president of the Czech Republic doesn't want EU flags flying from public buildings. The order caused a spat when a delegation from the European Parliament came visiting Prague Castle.

The trip was apparently a rather torrid affair, with the Greens MEP Daniel Cohn-Bendit, that old student radical from 1968, verbally attacking President Vaclav Klaus. They were hardly likely to be big buddies: Mr Klaus is seen not only as an outspoken opponent of the EU and the Lisbon Treaty, but he also dismisses mainstream beliefs about climate change, calling the legislation that the EU is so proud of "a silly luxury".

Mr Sarkozy was responding in the European Parliament to the UKIP leader Nigel Farage, who said that the delegation should have shown respect to a head of state rather than behave like thugs and bullies. Mr Sarkozy suggested respect should be shown by Mr Klaus as well.

This didn't protect the French president from the wrath of Mr Cohn-Bendit, who has apparently decided to make attacking heads of state his new trademark. Pointing his finger, he said America's president-elect would say "No, you can't", because the climate change legislation didn't go far enough.

Mr Sarkozy, rather mildly for him, responded in effect that the Green MEP always seemed such a nice man when they had agreeable lunches together, but turned into a different fellow altogether when the TV cameras were switched on.

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STRASBOURG 1030

"Europe turned up."

President Sarkozy was talking about the Georgian crisis, but it was the message of his whole speech - that the world needed Europe to be strong, and a strong Europe had to be united. After his speech the leaders of the political groups had their say.

Much of the French president's speech was pretty standard fare of course for speeches to the European Parliament - stress the need for Europe, and need for unity. It's what most here believe and want to hear.

He placed the blame for the financial crisis squarely on the shoulders of the American government: he said it began when they accepted the bankruptcy of Lehman Brothers. He also boasted that despite the difficulty of coordinating a response by the 27 countries with very different economic and political cultures, despite the misunderstandings and hesitations, Europe had got the response right. He said that the US had belatedly followed with a solution "based entirely on our plans".

He said there had to be a "re-moralisation" of capitalism, based on entrepreneurship, not speculation.

He told MEPs that when he first visited Dublin he had caused a fuss by saying the Irish would have to vote again on the Lisbon Treaty, but that is what a "courageous" Irish government had now decided. He said this wasn't easy for the Irish people, but Europe was about "a spirit of compromise" and this was what was being displayed. He predicted Lisbon would come into force, just a year late.

He concluded by saying Europe had to be built with the will of the nation states and labelled what he called "integrationalism" as an historic error. He'd enjoyed himself a lot, and the last six months had taught him a great deal. "Europe is the most beautiful invention of the twentieth century, Europe has moved me, it has changed me."

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On 1 July the French took over Europe with fanfare and flummery, the Eiffel Tower was bathed in blue, the EU's gold stars projected on this symbol of France.

And President Nicolas Sarkozy, the new President of the Council, proceeded to impose his frenetic style on an organisation used to a more leisurely pace. Today he is giving a final speech in this role to the European Parliament in Strasbourg. I doubt he will manage undue modesty.

Last week's summit of the EU's prime ministers and presidents ended in what Mr Sarkozy, at least, regarded as an historic triumph, with deals on climate change, the economy and the Lisbon Treaty.

The presidency can be a rather weak excuse for a few "informal" meetings in the country holding the presidency, with a few pet ideas shoved on top of whatever is the main business of the day. This was dramatically different.

There's no doubt Mr Sarkozy put his stamp on the presidency in a way that few manage, behaving as if he was indeed the President of Europe.

The veteran French Socialist Jack Lang told me he didn't always agree with Mr Sarkozy, but during his presidency he "gave a personality to Europe. He gave a feeling that Europe had a political existence. From an international point of view he gave presence to Europe".

Just as some unlikely leaders come to the fore in wartime so Mr Sarkozy seemed well-suited to our crisis-ridden times. But did his success really amount to very much?

The Irish No vote to the Lisbon Treaty was certainly seen as a crisis by the EU leadership, although it might not have bothered anyone else that much. Then there was the Russian invasion of Georgia. Within days Mr Sarkozy was in Tbilisi negotiating a ceasefire, then in Moscow signing it. Many felt it was deeply flawed, and ignored some crucial details. If so, it was typical of his style: restless action rather than careful analysis.

He called the first emergency summit since the Iraq crisis, to discuss the aftermath of the war. It wasn't to be his last.

One adviser told me this was an example of Mr Sarkozy's stubbornness paying off. Failure was not an option. Restless energy was. He called an emergency summit in Paris. It failed. He called another one. It was slightly better. He called an emergency EU summit. A bit more agreement. He travelled to Washington. He travelled to Beijing.

Ulrika Guerot of the European Council for Foreign Relations says "it may not be the best way of doing business, because you can make the reproach he looks like the king of Europe, it's an imperial way of doing the business of Europe.

"But with respect to the financial crisis he was the driving force for bringing together the G20 in a very short time, and he will be judged a success beyond his personal temper."

She forcefully makes the point that in the Georgian crisis and the financial crisis it was Europe making the running, not the United States. For some that is enough in itself. That is what really excites those who want the EU to play a bigger role in the world.

But this high-wire, high-risk summitry has infuriated Germany's leader Angela Merkel. When she was in the hot seat, conjuring the Lisbon Treaty out of the wreck of the European Constitution, she worked meticulously to discover each nation's hang-ups and hopes and carefully wrought a delicate compromise. Mr Sarkozy announces an idea, which often comes as a surprise to his diplomats and civil servants, let alone other leaders... and waits to see if it will fly.

Lord Patten, the former Conservative Party chairman and former EU Commissioner for External Relations, told me "While they both hate the comparison, the young Sarkozy is a bit like Chirac when he was a young prime minister - he was known as the bulldozer and he was known for his energy, his ubiquity and the way he got his own way simply by steamrollering or bulldozing things through, and I think there are aspects of that in Mr Sarkozy. It may or may not be the best way of doing business in France, but I have my doubts in Europe, which requires more continuity. But it has been a style and I suspect that after six months of the next presidency we might be looking forward to the smack of charisma again."

There were tentative suggestions from the French press and indeed Mr Sarkozy himself that there should be a way for him to continue his role, perhaps as leader of the Eurozone countries. This will formally come to nothing, but I bet one of the arguments we hear more of, perhaps today, is that his success and style proves the need for a full-time President of the Council, as proposed in the Lisbon Treaty.

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The hyper president was hyped up for his news conference at the end of the French presidency of the European Council. The summit he said would "go down in history".
President Sarkozy of France - but for a few days yet not of France alone - had praise for other leaders. Gordon Brown he said was "an extremely constructive European". The Irish Prime Minister Brian Cowen was "brave". But he saved the strongest praise for, well, himself.

He said, with an enormous grin, that it was obvious the changes that would be introduced by the Lisbon Treaty were needed: especially a full-time president of the Council. "Nobody today would doubt the need for a President of the Council showing real leadership." Pause for an even bigger grin. "Not just for six months, but for two and a half years."

There were of course four big issues to be covered in the news conference. Climate change. Lisbon. The economy. And just how well Mr Sarkozy had done in his six-month presidency.

He said that Europe had to stop getting bogged down in daft rules, and suggested strongly that it would take someone like him to make this advance.

He gave a long example about how he wanted his minister in one of yesterday's meeting but was told the seating arrangements wouldn't allow it. So he suggested bringing in another chair. He was told that wasn't possible, it was revolutionary. So he said he would get the chair himself. It showed that in the EU people could spend hours arguing about an extra chair. He said that Europe needed an injection of flexibility and freedom.

But he went on to complain about the endless repetition of speeches. He said after last night's discussions on the economy over dinner he had banned anyone from trying to repeat themselves this morning. Rather contradicting his earlier remarks, he said "we can't work without specific rules in place". Next week he'll give his final speech of the French Presidency to the European Parliament in Strasbourg. I am sure he will be as modest as ever.

PS - I've run out of green ink again, but will go shopping at the weekend.

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Mr Cowen didn't use the word "referendum". But the Irish prime minister has told his fellow leaders that his government "is committed to seeking ratification of the Lisbon Treaty" by the end of next October.

In return the EU will deal with what the Irish government claims are the "concerns" of the Irish people and give "the necessary legal guarantees". They will ensure that the Lisbon Treaty doesn't affect:
Ireland's traditional neutrality;
Ireland's laws on the family and abortion;
The taxation system.

If Lisbon comes into effect the leaders would then use the vote to make sure the commission "includes one national of each member state". The plan to slim down the commission would be abandoned.

The UK wants more legal advice about the nature of what is being promised, so no one can argue the treaty is now substantially different and needs to go back to the British Parliament... or British people.

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The man who organised the "No" vote to the Lisbon Treaty in Ireland is setting up the first pan-European political party to fight next year's parliamentary elections. Declan Ganley says that it will be a single issue party, campaigning solely against the Lisbon treaty and what he believes is the anti-democratic nature of the European Union.

Listen to my interview with him.

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President Nicolas Sarkozy looks like a man who likes nothing better than being at the centre of a crisis, unless it's being at the centre of four of them at once. If the normal way of doing EU business is about delicate compromise, he seems more in favour of push, punch and swagger. But he wants a triumph at today's summit, to round off an exceptionally busy six months in the hot seat.

He's written to fellow leaders telling them that they face a series of decisions that will be highly significant for the future of Europe. Wagging his finger, even before they are physically in front of him, he tells them in a letter of invitation that he is determined that they live up to their responsibilities, and show vision and a spirit of compromise.

What are the big issues ?

CLIMATE CHANGE

Agreeing the climate change package will be the most difficult task. Although the commitment to cut greenhouse gases by 20% by the year 2020 is not being directly questioned, both the newer countries of the east and big industrial countries are worried that the package is too tough, especially during an economic crisis.

Germany wants nearly all its industry to be protected from foreign competitors, who will not have to meet similar standards. They want carbon trading to be cost-free for nearly all their industry.

The Poles are leading Eastern European countries who say that they need more help, and more money, converting from coal.

This Brussels summit takes place while the world's environment ministers gather in Poznan in Poland. Diplomats say if the EU can't get its act together then the global talks may be doomed to failure.

LISBON

The Irish are likely to signal they will re-run a referendum on the Lisbon Treaty, after the summer's No vote. I wrote about this a short while ago and haven't much to add. I'm pretty sure this is going to develop during the day and I will update when I can.

ECONOMY

The Commission hopes that the prime ministers and presidents will back their 200bn-euro rescue package, but Germany isn't keen. The sign that the Commission has won is if the figure 1.5% of European Union GDP appears in the final documents. If it doesn't Mrs Merkel has blocked it.

AGRICULTURE

The French want to make some reference to the recent review of the Common Agricultural Policy. The British want to make sure it doesn't signal an end to reform.

DEFENCE

There will be a declaration that over the last decade the EU has become a global political player and has assumed more ambitious responsibilities. It will say that current military resources are inadequate and need to meet specific new targets. One of them is to be able to deploy 60,000 people within 60 days.

That is quite enough for a two-day summit. I'm told that the French desire for a conclusion by Friday afternoon is really serious: no lunch has been ordered for ministers. Although Chris Patten suspected that the French admiral who accompanied Jacques Chirac everywhere really had snacks, rather than nuclear codes, in his briefcase, President Sarkozy has nothing like that to fall back on.

By the way, I do intend to answer freebornjohn's serious allegations of bias. But I keep running out of green ink and patience. A post by the beginning of next week is not quite a promise, but it is an intention.

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The Irish foreign minister has said at a meeting in Brussels that the Irish government has not taken a decision on holding another Lisbon Treaty referendum. I'm sure that is technically true. But it's not the buzz around town, nor was it the thrust of his speech and the question and answer session afterwards.

Micheal Martin was speaking at an event organised by the European Policy Centre. He said the Irish government was in the midst of an intensive set of negotiations that would lead to a "roadmap" suggesting a way forward that both respected the results of the No vote in the early summer and what he called "the widespread desire across Europe to see the treaty come into effect". I travel quite a lot around Europe and it never strikes me as that widespread a desire, so I guess he means the politicians of other European countries. But he said he didn't feel bullied by them.

I am told that the plan is that by the end of this week's summit the Irish government will declare that it intends to ratify the Lisbon Treaty by this time next year. In return other countries will agree to legally binding statements making it clear the treaty does not affect three main areas of concern to No voters: abortion, neutrality and taxation.

For wonks, this would be a "decision" which avoids reopening ratifying Lisbon in other countries. It would be turned into a legally binding "protocol" later, probably bolted onto the treaty that would be needed when Croatia joins the EU.

There would also be an agreement to address a fourth main worry - the potential loss of influence through the rotating loss of a commissioner. If the Lisbon Treaty was in place, the plan to slim down the commission could be killed off if all 27 countries agreed. At the moment this is quite a serious sticking point because Belgium and Luxembourg don't like it.

By Friday night, if he's very lucky and doesn't face any hard ball interviews, the Irish Prime Minister Brian Cowen may not actually be made to utter the words "second referendum", but this is what it is all about. Mr Martin said: "Does it require a second referendum? I am not a constitutional lawyer, there are potentially other ways, fraught with risks, that one could perhaps pursue, other than a referendum, but when we looked at this initially, the clear advice at the time was that it required a referendum and that's why we had one earlier this year. So I think that's ultimately the way, if certain things were agreed, one would have to go."

I asked him how he would answer those who said that it would be an insult to ask people to vote again. "In a democracy I don't believe it is ever an insult to go to the people to seek a decision. That's it, and I firmly believe that."

Mr Martin said the most important thing was to listen to the people. His aim was to find a way to "reconcile the decision of the people with the overall desire of the people to play an active role in the European Union".

There is clearly a belief by the Irish government that the Irish are not against the EU, not against its direction of travel, and not against the general thrust of the treaty.

That may turn out to be true, but it's a heck of a risk to take.

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Germany's Christmas market sparkles with seasonal cheer. Small girls in matching pink scarves and hats sing with gusto from the stage, as well-muffled adults drink mulled wine and choose between thick lentil soup, sausages in a bun or pizza before doing a spot of shopping for wooden toys or jewellery. You would hardly know there was a recession on.

Some think the country's leader, Mrs Merkel, is behaving as though there wasn't. There will be a row at this week's summit because her government has been so dismissive of the European Commission's rescue plan. The commission wants all countries in the EU to cut taxes and increase targeted spending on key industries to boost the European economy. Mrs Merkel hits back with talk of not joining a senseless race to spend billions. Her finance minister, Peer Steinbrueck, talks of other nations behaving like lemmings, following each other on a path to suicide.

She is already being punished. Gordon Brown is hosting a "European global economic summit" with President Sarkozy and the Commission's President Barroso at Downing Street today. When we ask Mrs Merkel's office why she is not going, the indignant reply is "Ask Gordon Brown why she hasn't been invited".

But in a world where Gordon Brown has jilted Prudence, and George Bush has come out as a Keynesian New Dealer why is the German government not willing to spend its way out of a recession, when one would think it would take to it like a duck to water?

There are a number of possible answers, and they are probably all correct.

At the Christmas market I talk to Hubertus Pellenghar, the head of Germany's retail organisation. He says he would like the sort of tax cuts the commission are urging, but looks around him with approval at the shoppers spending and says that while consumer confidence has been low for a long while people are spending more this Christmas than last year. I am amazed, but he insists this year's figures are better.

Some think Mrs Merkel just doesn't realise how serious this is. They say that the recession has yet to bite in Germany, and that people are underestimating the seriousness of what will happen next year. There's a vague sense that as the whole thing was caused by failings that Germany does not share, the country will escape the worst of the knock-on effects, which does require an odd belief that economics is somehow fair and just.

There are those who point out that next year is election year. This makes governing in a grand coalition difficult. There is an intense debate within both the Social Democrats and Christian Democrats about the desirability of tax cuts.

Mrs Merkel would like to be in a different coalition after the election, with the Free Democrats. Their leader Guido Westerwelle tells me this is all about short-term politics. "It's really a problem that the rest of Europe is reacting and that the German government is still hesitating. The German government is concerned with the election campaign next year, but it would be better to act now by lowering taxes. Perhaps they are hesitating because they want to decide this very close to the election, but by then it could be too late."

Others think that tax cuts really wouldn't work in an economy where a large number of people pay no tax at all and those that do seem more inclined to save than spend. If they squirrelled away the money from a tax cut it wouldn't help at all.

This too is part of the social market. There is a distinct lack of a "get rich quick" mentality. Neither people not companies borrow a lot. Often firms deliberately aim at slow and steady growth. Thrift is a significant virtue. There has been no crash in house prices, because they never rose that much. The Germans are still in love with Prudence, even if Gordon has moved on. And they want to defend her virtue, angered that other countries are treating her shamelessly.

One of German's most prominent industrialists, the former head of the bosses' organisation Hans-Olaf Henkel, says: "One reason why our chancellor is a little bit more reluctant is the fact that we Germans believe we should never forget the stability of the euro. To spend a lot of money and accumulate a lot of debt will weaken the euro in the long term and leave additional debt for our children and grandchildren. Current governments should not forget the effect their decisions have on future generations. Just to spend and to leave it to our children to find out how to pay the money back I think is rather irresponsible. Therefore the German government response is not bad at all. Someone has to stay calm in Europe."

An American professor working at Berlin's Free University, Irwin Collier, thinks this is all rooted in the past and an extreme aversion to anything that might lead to the horror of the hyperinflation of the 1930s. He says it now expresses itself in Germany's self-perceived guardianship of the rules surrounding the euro, rules for a common currency without a common tax policy. "The one fear the Germans always have is that they will be stuck with the bill for irresponsible fiscal policies of their neighbours. This fear is in many ways well-founded.

"Germans feel like they've invested a lot in this set of rules on the size of national debt and they want to make sure that others are bound and they see that once people start violating those rules Germany will be paying. It's more looking to the future. It's not so much right now that Germany is afraid, they are really worried about establishing a precedent that other governments can run large deficits and Germany will be counted upon to bring stability back."

There might be a more immediate call for Germany to dig deeper into its pockets. The commission is calling for all EU countries to spend 1.2% of GDP on tax cuts and investment. Britain's initial programme falls just a tiny bit short of this, although subsequent announcements probably bring it up to the mark. France more than met the commission target and, without having done the sums, I suspect Spain is around this figure too. Germany isn't. Its programme amounts to 0.5%.

But it's clear that a whole range of countries, from Latvia to Ireland, Romania to Hungary, can't afford to spend the sort of money the commission wants. The commission's figure is just an average. So it needs somebody to spend more for the average to be reached. Now this is not about putting money into a common pot, it is about spending at home. But to reach the commission target of a Europe-wide figure of 1.2% someone has to spend more. The Germans don't want it to be them.

This could be a crucial moment in a trend that has been apparent since German reunification. A former economic adviser to the commission, Belgian economics professor Andre Sapir, says: "The message that Germany has to pay more because it has room for manoeuvre is not a very credible message".

But, I say, that is the way the EU has been run for the last 50 years. "Yes, but I don't think that is the way Europe is going to work for the next 50 years. It's true that Germany was the paymaster because of the past, the war, and the view that what is good for Europe would be good for Germany. I don't think that Germany should be made to pay forever for its sins. They were great, there's no doubt about that, I lost all four of my grandparents to the Germans, but Germany doesn't need to pay forever. Europe cannot be Europe if Germany is put in one corner and has to pay forever for the sins of the past."

As I make my slow way through the packed Christmas market I notice that far more people are taking their time standing at the small round tables grazing on the variety of food on offer, sipping hot fragrant wine held tight in mittened hands, than looking around the stalls, and buying Christmas presents. It's striking that, while it is very easy to see the commission plan as them getting in on the act, as little more than a political desire to be at the centre of things, all the economists I speak to think that if anything it is too modest, too little to do the job. Will sensible German prudence turn out to be the right course, or too stuck in a familiar rut in unfamiliar times?

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This time next year surely the Lisbon Treaty must either be dead and buried or alive and kicking.

My prediction is that next week the Irish government will announce that it will ask the Irish people to vote again on the Lisbon Treaty in a new referendum next autumn.

The Irish prime minister is on a whistle-stop tour of Europe - first Luxembourg, then Germany, London on Thursday then a quick trip to Paris on Friday. While he does the major players, his Europe minister is visiting the capitals of the smaller countries. (Luxembourg may be a tiny country but Jean-Claude Juncker is a big player, on account of his political longevity and his role leading the eurozone countries.)

What they are hammering out is the outline of a deal to put to next week's European Council. They are looking for something that would allow them to say this is not holding the same vote all over again.

Whether the piece of paper ends up being called a protocol or an opt-out or whatever, it would amount to a series of disclaimers. Anyone who's been following the story would know what sort of things it would promise. It would say that Ireland's position on neutrality/abortion/tax will not be affected by the treaty. It's likely the other countries would readily agree that, if the Lisbon Treaty is voted through, the commission can stay at its current size. One of the worries was that Ireland would lose influence by losing a commissioner every so often.

Will this be enough for the No campaigners? Definitely not, they will regard this as undemocratic and insulting.

Will it be enough for the voters? It's a very high-risk gamble. On the one hand, in a deep financial crisis, the Irish government will argue now is not the time to cut ties and float away from the safe haven of the European Union - and there will be attempts to suggest that is what another No vote would mean.

But just look at Prime Minister Brian Cowan's poll ratings, which have been plunging since the early summer, and you know that he is gambling his job when the odds are against him.

And an even more intriguing question: what would a second No vote mean for the treaty? A famous Lady Bracknell quote - that losing one parent looks like a misfortune, but losing two looks like carelessness - might spring to the minds of other European leaders. But more to the point, it would either kill the treaty stone dead or force the EU to go ahead without Ireland.

Freeborn John: I will carry on writing about this and any other EU subject when I feel like it and when it is appropriate. Lisbon is important but so is the effect of such treaties in people's ordinary life: so what sort of cars we drive, and what fish people are allowed to catch are at least as interesting to me as grand institutional arrangements.

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A deal has been done on the law to restrict the carbon output of cars sold in Europe. But is it an "empty deal", a noble aspiration savaged by the short-sighted and selfish car industry and car-producing countries, as some environmentalists believe? Or is it "good for industry, good for the environment and good for jobs," as the Socialists say?

It's not yet written in stone. The European Parliament has to vote on it, and so do ministers from the EU's 27 countries. But the deal between senior MEPs and the French presidency is likely to hold because it has the backing of both big political groups in the parliament of left and right.

The Conservative MEP Martin Callanan, who was part of the negotiations, rejected one possible compromise last week but now says: "The deal we have struck represents the best of both worlds. We have shown we can encourage car manufacturers to go green by including incentives for investment in clean technology, but without driving them out of business".

So what has been agreed?

A target of reducing CO2 emissions to an average of 120 grams per kilometre driven by 2012 would be introduced in stages: for example only 65% of new cars need meet this target by 2012. The final target date is now 2015.

A sliding scale of fines that reaches the maximum penalty, 95 euros (£79) per gram over the limit, in 2019.

A long-term but non-binding target of cars producing no more that 95 grams of CO2 per kilometre travelled by 2020.

Environmentalists argue this is very much watered-down, compared to what was on the table at the start of the whole tortuous process.

The German Green MEP Rebecca Harms has told me that the European Union will end up with a 2012 target that is higher than the actual average produced today. "It is grossly misleading to suggest that these measures will address the impact of cars on the climate."

Should the big power blocs of left and right be proud of a rounded, balanced package - or ashamed of a sell-out?

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