Sarkozy and Cameron on collision course?

David Cameron, leader of a British Conservative Party that is well ahead in the opinion polls just weeks ahead of a General Election, has already ruffled feathers across La Manche, with reported jibes about the diminutive stature of French President Nicolas Sarkozy, who is reeling from personal life scandals and a drubbing in regional elections. The remarks provoked a reaction from Paris, which accused the British Opposion leader of lacking respect for the French Head of State.

Such a trifling spat may be just the start of a tricky Anglo-French relationship over the future of EU budget, in particular the €60 billion common agricultural policy and Britain’s special budget rebate. The rebate or “chèque Britannique”, as it is sometimes known, rankles with France, which feels Britain is too often a semi-detatched member of the European club: free riding on the benefits of the common market while resisting ‘ever deeper union’ and refusing to pay its way. The rebate was won in 1984 by Margaret Thatcher who swung her handback and demanded ‘my money back’. It has since entered into Conservative Party political iconography of a by-gone ‘golden age’ when Mrs T. defeated Argentina in a war over the Falklands, stood shoulder-to-shoulder with Ronald Reagan against the Soviet ‘Evil Empire’, took on striking coal miners and unleashed a wave of privatisation and deregulation that transformed the British economy. It is hard to imagine a Conservative government ever agreeing to give up such a totemic symbol as the EU budget rebate, the effect of which is to ensure Britain gets almost the same from the EU budget as it puts in.

In policy terms, the rebate is only really necessary because the EU budget is dominated by agricultural spending (nearly half of the budget goes on the CAP) and Britain is a relatively wealthy country with a relatively small farm sector. This gives rise to the structural budget imbalance that Mrs Thatcher sought to address with the rebate. If the CAP were scaled back then Britain would not need a rebate. Or so the argument goes. This was the case made by former British Prime Minister Tony Blair during the EU budget negotiations of 2005 and 2006. In the end he was comprehensively outmanoeuvred by President Sarkozy’s predecessor, Jacques Chirac, giving up a portion of the rebate in exchange for a ‘budget review’ that has yet to bear any fruit.

There is irony in the fact that that Nicolas Sarkozy, the man who most wants to see the end to the British rebate, has only this week declared himself to be a powerful opponent of downsizing the CAP, the most natural way of achieving that goal. Earlier today, in his first public comments after his UMP party’s defeat in regional elections, President Sarkozy declared:

“I am ready to confront a crisis on a European level, rather than to accept the dismantlement of the Common Agricultural Policy… I will not let our agriculture die.”

Could this put Nicolas Sarkozy, defending the CAP, on collision course with David Cameron, defending the British rebate? Perhaps, but there is an important twist and a possible solution. British farmers and landowners, who get around €4 billion a year from the CAP, largely vote Conservative. At heart they’re anti-EU but when they think with their heads they don’t want to see an end to the EU subsidies that they would be very unlikely to win from the British Treasury. Conservative politicians find it easy to talk tough on the CAP but there would be political hell to pay if they actually succeeded in abolishing subsidies for British agriculture.

Meanwhile, as President Sarkozy talks tough on preserving the CAP, the enlargement of the EU to 27 member states means France is on course to become a net payer into the CAP, rather than a net beneficiary. This will not have gone unnoticed in the French Ministry of Finance which has traditionally formed a strong alliance with the Agriculture Ministry and French farming, regarding the CAP as bringing ‘good German money to rural France’. When he sees the turning of the fiscal tide, and French taxpayers start paying to support Polish, Romanian and Bulgarian farmers, President Sarkozy may revise his view. There is a single solution to both dilemmas: cofinancing of the CAP. Rather than a CAP funded from a common European pot, with all that means for politically difficult budget imbalances, each country will meet a much larger share of its own farm subsidy bill. Of course this will go down very badly with the new member states, who will have to fund their own farm subsidies, but in the face of an Anglo-French alliance, with large net payers Germany and the Netherlands also likely to lend their support, they may have no choice. One man who may find himself in a rather tricky position is Agriculture Commissioner Dacian Ciolos, who will find it difficult to sell such a policy to his Romanian countrymen.