Identifier
Created
Classification
Origin
06BERLIN1342
2006-05-16 14:44:00
UNCLASSIFIED
Embassy Berlin
Cable title:  

Merkel Previews German EU Presidency Agenda

Tags:  ETRD ENRG EFIN PGOV ECON PREL EUN GM 
pdf how-to read a cable
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UNCLAS BERLIN 01342

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 ACTION: ECON
 INFO: PAO POL AMB CHRON FAS DCM JIS ECONMIN FCS
CX2BERLN:
 ACTION: ECON
 INFO: PAO POL AMB CHRON FAS DCM JIS ECONMIN FCS

DISSEMINATION: ECON
CHARGE: PROG

APPROVED: A/DCM:JBAUMAN
DRAFTED: ECON: DJORTBLAD; RMI
CLEARED: POL: MMARTIN

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TO RUEHC/SECSTATE WASHDC PRIORITY 3178
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E.O. 12958: N/A
TAGS: ETRD ENRG EFIN PGOV ECON PREL EUN GM
SUBJECT: Merkel Previews German EU Presidency Agenda


UNCLAS SECTION 01 OF 03 BERLIN 001342

SIPDIS

STATE FOR EUR EUR/AGS, EUR/ERA AND EB/TPP
PASS TO USTR SDONNELLY, MMOWREY

E.O. 12958: N/A
TAGS: ETRD ENRG EFIN PGOV ECON PREL EUN GM
SUBJECT: Merkel Previews German EU Presidency Agenda



1. SUMMARY: Chancellor Merkel highlighted energy
coordination, deregulation, and research investment as key
priorities for Germany's EU Presidency next year in two
Berlin speeches on May 9 and May 11. However, she described
the politically sensitive issue of the EU Constitution as
requiring "further reflection," suggesting it would be
premature to press for it during Germany's early 2007
Presidency. But Merkel will activate a measure in the draft
Constitution to strengthen EU follow up on initiatives. The
Chancellor cautioned about further EU enlargement saying the
EU must make clear to some countries aspiring to full EU
membership that they would not receive it for "the
foreseeable future." She also argued the EU's need for
economic reform and for addressing energy issues. EU
Commission Vice President Guenther Verheugen (SPD),who
attended the May 9 Forum, supported Merkel's proposals.
German officials say that 2007 elections and political
uncertainties in France, the UK, the Netherlands, Italy, and
Finland complicate Germany's effort to set ambitious goals
for its presidency. END SUMMARY


2. German ministries have begun internal coordination with
the Chancellery on themes for Germany's early 2007 EU
Presidency. Chancellor Merkel used two major speeches in
Berlin to outline her views on European integration and to
give a sneak preview of Germany's agenda for its EU
presidency in the first half of next year. Speaking at the
Europe Forum May 9, an event sponsored by several European
public media networks, and at the Bundestag on May 11,
Merkel made further development of the EU's internal market
the key issue of her presentation. She made clear that she
regarded the internal market as both a great historical
accomplishment and central piece in the EU's ability to take
on the challenges of a globalized market. She noted the
Airbus-Boeing trade dispute and the Commission's challenge
to Microsoft on competition as issues that member states
could not tackle without the EU framework.



3. Merkel stressed the importance of the Lisbon economic
reform process. German officials told us the March 2007
summit under the German presidency will include a new step
in the Lisbon reform agenda. For the first time, the
Commission will issue a "report card" to member countries on
needed reforms, based on each country's own reform agendas
submitted to the Commission since 2005. Merkel also pledged
Germany would meet its pledge for funding research and
development at 3 percent of GDP.

EU INSTITUTIONAL REFORM AND ENLARGEMENT


4. Addressing concern over the EU's future after voter
setbacks in France and Netherlands last year, Merkel argued
the "EU was better than its reputation." She said the EU
must deliver on promises of growth to renew confidence,
noting that many in Germany no longer associate the EU with
a prosperous future. In surprisingly direct language,
Merkel also called for setting clear limits for the EU's
enlargement. She noted the EU must say to certain countries
their EU membership is not possible in the foreseeable
future, although promises already made must be kept.


5. A German Finance Ministry official dealing with the EU
said Merkel's speech had to accent limits to EU membership
in order to address the EU institutional crisis created by
the enlargement to 25 countries. The official said German
leaders had mistakenly hailed the enlargement as a success
without having achieved the EU institutional reforms that
would enable a larger EU to govern itself. The EU and
Germany were now paying the high political price of having
initiatives like the EU Services Directive and the
Constitution suffer setbacks. Anxious voters had balked at
these steps as part of venting frustration at apparent EU
drift and at increased economic uncertainty they blame on
the EU. He said the enlargement had also significantly
weakened the Commission. Squabbles among the now numerous
Commissioners impeded decisions. Each new EU member sought
to assert the importance of his/her Commission portfolio,
creating roadblocks. He said prospects for further
enlargement were damaged by the "antics" of certain new EU
members.


6. While limiting further EU membership, Merkel also backed
a more vigorous EU Neighborhood Policy that seeks nearly
full integration into EU economic structures. She said the
Neighborhood Policy needs more political aims, making it
"more than just a free trade relationship." With reference
to Turkey's chances for membership she said, "those who
begin the negotiation process for accession together (Turkey
and Croatia) do not automatically have to enter the EU
together," an apparent reference to the overwhelming
rejection of Turkish EU membership by her CDU party.

EU CONSTITUTION


7. Merkel reportedly reduced her ambition to promote the EU
Constitution during the German presidency. In her Berlin
speeches, she called only for further reflection among
member states about the Constitution, while emphasizing the
EU's earnest need for this institutional reform.
Chancellery and other advisors reportedly persuaded Merkel
that major political uncertainties in key EU member states,
including France's early 2007 election, would impede a more
ambitious agenda for promoting the new constitution.
Besides France, officials said political leadership issues
would affect the UK, Italy, the Netherlands, and Finland in
2007, thus preventing Merkel from enlisting vital allies for
a Constitution (and other reforms) during the German
Presidency.

8. While cautioning against hasty renewal of a ratification
process for the Constitution, Merkel wishes to launch a
process in 2007 for gradually building support for a
constitution. According to German officials, Merkel will
"de facto" activate a provision in the stalled Constitution
that calls for continuity between EU Presidencies by
consolidating their agendas. According to the Finance
Ministry, Germany has already begun working with Portugal
and Slovenia to craft a common EU Presidency agenda that
would encompass the 18 months of all three countries' terms
through mid-2008.

ENERGY


9. Merkel highlighted the need to integrate energy security
issues into Germany's and the EU's foreign and security
policies. By the time of the spring summit in 2007, the EU
Council will present a report on a coordinated EU energy
policy. Merkel summed up the EU members' problem as the
need to recognize: a common energy dependency, a common
responsibility for secure energy supplies, and a need to
cooperate for access to energy supply. The EU will have to
find a way of ensuring supply without compromising its
foreign policy human rights principles. Merkel alluded in
her speech to the pressures of competition from China for
raw material imports.


10. Although Merkel announced a "common EU energy policy"
as a goal, the German response to the EU's paper on energy
policy in February had been to minimize the authority given
to the Commission over energy diversification and supply.
German officials believe energy policy should largely remain
a member state prerogative. German officials told us the
Merkel coalition would look to continued discussions in the
European Council on coordinating energy policies rather than
an "integration" of energy policy in the Commission.


11. Merkel appealed for improved cross-border power line
infrastructure, pointing to the many border choke points
where too little current can pass between EU countries. She
noted that Germany can send surplus power to Italy only via
transmission through France, which adds a corresponding
cost. Merkel also called for acceptance of "European
champions" in industry, implicitly backing the cross-border
takeover bid by Germany's Eon for Spain's Endesa. According
to a German Finance Ministry official, Merkel thus signaled
Germany's confidence that capital market forces would
prevail in resolving recent EU "investment protectionism,"
reflected by Spain's and France's steps to prevent takeover
bids in the energy sector.

DEREGULATION


12. Chancellery officials say Merkel will press for EU
deregulation as a German Presidency theme. Merkel
ironically noted in her May 9 speech that, in its 50 year
existence, the EU had never abolished a regulation. She
called for the introduction of the "discontinuity rule" in
the European Parliament (legislative initiatives could not
be transferred from one elective term to the next),which
would automatically put the brakes on regulatory activity.
The German auto and chemical industries have frequently
complained about inconsistent EU regulations that mandate
tougher safety and environmental standards without regard to
cost and other burdens. Chancellery officials have told us
they would seek more fine-tuning of the REACH directive on
safety of chemical substances. In her May 9 speech, Merkel
cited the EU Parliament's effective compromises on the REACH
text, praising the Parliament's role in strengthening the
EU's democratic process. She noted EU parliamentarians
carefully weighed the impact of the REACH directive on their
home district industries as they considered ways to make the
compromise draft compatible with industry interests. Merkel
specifically greeted the presence of EU Commission Vice-
President Gunther Verheugen in her May 9 audience,
emphasizing her support for Verheugen's goal of eliminating
the EU's excessive or contradictory regulations.


13. COMMENT: The German Presidency will profile Merkel's
EU leadership role. EU Commission Vice President Guenther
Verheugen (SPD) endorsed many of her proposals and called
for more leadership in the EU, pointing out that the
political situation in other major EU member countries will
thrust Merkel into a leadership position in the coming
years.
TIMKEN JR