Introduction

Stiftung Wissenschaft und Politik German Institute for International and Security Affairs

New Impulses from Europe’s South Spain and Portugal regrasp the Initiative in the Process of European Integration

Günther Maihold/ Andreas Maurer SWP Comments

At the end of February 2005, nearly twenty years after their accession to the then European Community, Spain and Portugal have once again given a clear signal of their identification with the European Union (EU): In Spain the first national referendum on the ratification of the Treaty establishing a Constitution for Europe (TCE) ended in a positive result, with 76.7% in favour; albeit that the low turnout clearly indicates the limits of this enthusiasm. In Portugal, a new government with a stable majority was elected. Prime Minister José Sócrates is keen to take on a central role in the process of European integration. A decisive factor in the future success of their efforts will be the question of whether Spain and Portugal are ready—beyond their shared interest in maintaining the inflow of money from the Structural and Cohesion Funds—to take on the political costs arising from their newly sworn European identity.

The interests of the Iberian peninsula carry also find expression in a desire for more increasing weight in Europe: The change of comprehensive concessions in the negotia- government in March 2004 and Minister- tion of the financial perspective 2007–2013. President Zapatero’s pro-European tenden- This aim is at the forefront of their minds cies marked a first step for Madrid on the as both countries loudly present their new way towards a foreign policy with a clear European credentials. Ensuring continued European profile. Now Portugal, with the access to the Structural and Cohesion clear mandate for the Socialist José Sócra- Funds remains the prime aim of both gov- tes, is undergoing a change of course ernments. The new Portuguese head of whereby its Transatlantic ties are being government has made this transparently loosened in Europe’s favour. These devel- clear by laying particular emphasis on the opments present Germany with new oppor- social cohesion of Europe. tunities to bolster its position in the EU, not just in terms of its desire to ensure the more flexible operation of the EU Stability Portugal under José Sócrates: Pact, but also as regards the compatibility Signals for Germany and Europe of the respective European socio-political José Sócrates is buoyed by his Socialist models. This Iberian common ground will Party’s absolute majority [see table]. His aim

SWP Comments 13 March 2005

1 Table: Results of the Portuguese parliamentary elections

Party Result Seats Result Seats 2005 2002 Partido Socialista (PS) 45.05% 120 37.9% 96 Partido Social Democrata (PSD) 28.7% 72 40.1% 105 Partido Comunista Português (PCP) 12 10 CDU 7.56% 7.0% Partido Ecologista Os Verdes (PEV) 2 2 Partido Popular (PP) 7.26% 12 8.8% 14 Bloco de Esquerda (BE) 6.38% 8 2.8% 3 Other 4.15% – 3.4% – Total – 230 – 230 Turnout 65.03% 62,3% Source: Comissão Nacional de Eleições, CNE (http://eleicoes.cne.pt)

is to use a more forthright European inte- be borne in mind that a constitutional gration policy to win back the popular trust amendment requires a two-thirds majority in the political system that was squandered (154 votes) and necessitates co-operation during a Conservative term of government between the government and opposition. under his predecessor Pedro Santana Lopes, If it were held, it is probable that the refer- which lasted just six months. endum would reflect the broad popular The nomination of a new cabinet, which support for the TCE. Currently, only the is only half made up of members of the Communist Party (7.6% in the election) Socialist Party (PS), and the resulting open- have explicitly come out against the TCE. ness to independent expertise is a signal to On the right of the political spectrum, it is Portuguese society that a new chapter in to be expected that the traditionally euro- the governance of the country should now sceptic Partido Popular (7.3%) will declare begin. The absence from the cabinet table its opposition to the TCE now that its col- of the former EU parliamentarian and com- laboration in the governing coalition has missioner Antonio Vitorino infers that he come to an end. will be freed up to stand for the presiden- tial elections in early 2006. Sócrates’ management of his personnel Dynamising the Portuguese Economy thus only partly follows the Spanish ex- Sócrates has made no big promises to his ample of making a clean break with the fellow citizens: His country has the lowest previous government. Unlike the previous per capita income in the Euro-zone. The government though, the emphasis laid on impact on Portugal of the EU’s Eastern the European dimension will form a key enlargement was particularly tangible; characteristic of the new government, competition from Hungary, the Czech which will be forced to take unpopular Republic and Poland for trade and invest- measures in many fields if it wishes to ment has clearly dented Portugal’s growth. reassert Portugal’s role in Europe. The country can no longer flaunt its profile With a reform of the national constitu- as a platform for cheap labour—something tion, the way should be prepared for a ref- from which it profited in the EU of 15 — erendum on the European constitutional since the labour costs in the new member Treaty. The Portuguese Constitutional states are less than half of those in Portu- Court had declared the holding of a refer- gal. There is therefore a pressing need for endum incompatible with the relevant Portugal to redefine its role in the enlarged articles, in December 2004. Yet, it should EU. Above all, it must raise its productivity,

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2 improve its competitiveness, reduce the ciple of rotation on a financial yearly basis. degree to which the production structure Moreover, the improvement of competitive- relies upon traditional, labour-intensive ness—a Lisbon target of such importance to methods, and dynamise growth in tech- Portugal—would be tied to the consolida- nology-intensive, competitive sectors. Por- tion of the budget. In Vitorino’s opinion, tugal wants to lead its production structure this would boost the flexibility of a Stability down a path currently trod by its competi- Pact, whose budgetary deficit limit of 3% tors in the enlarged EU. But herein lies the Portugal only managed to keep to last year nub of the problem, since the flow of for- by including in its calculations one-off eign investment that is so important for the sources of income, largely derived from the modernisation of the Portuguese economy sale of state assets. Without these one-off is tailing off. It was in this light that the sources, Portugal’s deficit would have lain new head of government Sócrates spoke in at 5%, meaning that structural reforms are a campaign speech of a “technological now inevitable. Among those areas destined shock-treatment” for his country. He plans for reform are the control of state expendi- to boost the productivity of the economy ture and Portugal’s public finances, which and the level of training via massive state need to win back international trust. This investments amounting to 20bn Euro. means a significant reduction in the Whether this plan actually works, will sure- 730 000 state-employees who sap 15% of ly depend on the Barroso-Commission’s zeal GDP and devour 80% of tax income. For in policing and condemning state invest- these reasons, the new Sócrates govern- ments, under the mantle of European com- ment plans to dismantle 75 000 public sec- petition policy. As the implicit “loser” in tor jobs within four years, and to reinforce the elections, Barroso is hardly likely to discipline over expenditure. spurn a chance to scrutinise Sócrates’ inter- vention policy. Another prerequisite for a successful alteration of the production Substantial Collaboration in the Shaping structure will be Portugal’s success in keep- of the European Construction ing growth rates at a positive level and on a Since Europe is the destination for 85% of lasting basis: Between 1987 and 2000, an- Portugal’s exports, it has become the epit- nual economic growth rates lay on average ome of emancipation in terms of integra- at 3.5%, while per capita income rose from tion and foreign policy for the country. 55% to 71% of the EU average. With growth Apart from the three main focuses of Euro- falling since 2001 to an average of 1% and pean policy (reorientation of the Lisbon plummeting to -1.3% in 2003, the chances Strategy in a direction compatible with the of raising the hourly productivity rates— European social model, revision of the Sta- which are 40% below the EU average—have bility Pact, and negotiation of the financial visibly shrunk. perspective 2007–2013) Berlin and Brussels are faced with a partner who also has a considerable degree of self-confidence in its Linking the Lisbon Strategy with the foreign policy. The new Portuguese govern- EU Stability Pact ment wants to take on a formative role in According to the economic programme European co-operation and Transatlantic elaborated by Antonio Vitorino for his relations. In this, the government plans to party, the new Portuguese government will follow a path that is characteristic of a press for a reform of the EU Stability Pact, country with, simultaneously, a European so that it is treated as part of the Lisbon calling and an Atlanticist orientation. In Strategy. The testing of the Stability criteria contrast to the first measures taken by his would thus become more programme- Spanish colleague Zapatero, Sócrates’ oriented and would be freed from the prin- government has announced no immediate

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3 alteration to Lisbon’s Iraq policy. Yet, the the Constitution were mostly to be found new Foreign Minister Diogo Freitas Do amongst the regionalist nationalists and Amaral vehemently condemned the in- their parties, as well as amongst those vasion of Iraq before being called to office, sections of civil society that are critical of which does indicate a shift in the weighting globalisation or are radically left-wing. In of Portugal’s foreign policy. The govern- the Catalan network “No a la Constitució ment has just made it clear that it will con- Europea” more than a hundred communist, tribute to peace keeping efforts under the pacifist and youth organisations banded UN mandate. It is looking to deepen the together in a campaign against the TCE. To CFSP’s conflict prevention role and re- their minds, the Constitution is too neo- inforce collective security on the basis of liberal, imperialistic and militaristic. The the Atlantic alliance. The new government Treaty was apparently drawn up undemo- would like to see relations with the USA, cratically and is incapable of ensuring which are so important for Portugal even in social, political and civil rights, and the a domestic context, cultivated, not just bi- rights of minorities. laterally, but also—and above all—within Nevertheless, many civil society group- the Atlantic community as a whole. ings voted for the TCE. The large citizens’ In relation to the shaping of the new organisation “Basta Ya”, which presses for world order, Portugal now seeks to drop its the struggle against terrorism, the defence formerly passive role and participate more of the rule of law and the autonomous actively in international organisations (UN status of the Basque lands, advocated the and Bretton-Woods organisations). As for its TCE. It greeted the constitutional Treaty as regional policy, Portugal is most concerned an instrument with which to combat the to shore up its significant investments infringement of human and fundamental abroad (Spain and Brazil), in the EU, North rights in the Basque country as well as Africa, Angola, Mozambique and Cape Basque nationalism. Verde. It is therefore to be expected that The Spanish referendum should send a Portugal will be part of that group of states, positive signal to the whole EU: Of the which in the run up to the tenth anniver- 42.3% of the population who turned out, sary of the Barcelona Initiative, demand a 76.7% voted for the Treaty. The results greater concentration on North Africa. remained within the realm of expectations, Portuguese development co-operation but did not on the other hand document should gain a new dynamic, since it is Spain’s fascination with Europe, as had traditionally deployed to secure strategic been hoped. The greatest support for the national interests, in particular the pro- TCE came from the Canary Islands (86%), motion of language and culture (especially followed by Extremadura (85.2%). In the within the community of Portuguese-speak- Basque country, by contrast, opposition was ing countries, the CPLP). at its highest with 33.7% of voters there registering their disapproval. In Navarra and Catalonia, the no-vote was sizeable at Spain after the Referendum on the 29.2% and 28% respectively. constitutional Treaty In some of the bastions of support for the Coinciding with the elections in Portugal, opposition popular party (PP), large sections the Spanish referendum on the constitu- of the electorate clearly could not bring tional Treaty was the first in the round of themselves to vote for the Constitution, de- popular votes in France, Denmark, Britain spite the party’s urging them to. Too often, and six other states, which is seen as criti- domestic conflicts (like that surrounding cal to its ratification. the question of autonomy for the Basque A yes-vote was never in doubt in tradition- lands) determined the behaviour of those ally pro-European Spain. The opponents of voting against the Treaty, so that the some-

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4 what infectious togetherness of the two big a result of Spain’s real convergence. The parties brought a ‘regular’ but hardly a Spanish economy has grown since the mid- convincing result. In this sense, the mean- nineties at an average rate 1% above that of ingfulness of the Spanish referendum is the EU as a whole. In 2004, Spanish growth rather limited, and a positive ripple-effect was 2.6% above the Euro-zone mean. Span- throughout the other countries cannot be ish per capita GDP is already 87% of the detected. European average, whilst its level of conver- gence with the rest of Europe in 1986—the year of Spain’s accession—was just 74%. The The Costs to Spain of Enlargement regions Valencia, Canaria, Cantabria and, In Spain too, the Eastern enlargement of after many calculations, Castile-Leon have the EU has had a considerable impact upon for some time been above the 75% mark the country’s financial position. At present, and will automatically drop out of the high- eleven of the seventeen autonomous re- est development category. The Cohesion gions are Objective I areas, as their average Funds present a similar picture: The real per capita income is less than 75% of the convergence of the national economy, per capita GDP of the EU. About 28% of the when coupled with the “statistical effect”, Objective I funds flow to Spain; moreover, could mean that in future Spain will lose the country receives 62% of the EU‘s Cohe- up to 70% of its income from the European sion Funds. All this makes it the number Funds. one net beneficiary of the European Struc- The Spanish government is fearful that tural and Cohesion Funds. According to the enlargement has unleashed consider- Spanish financial experts, by the end of able economic costs, which will not be re- 2006 Spanish GDP will be about 7% higher couped through the expected gains arising than it would have been without the Struc- from the creation of a larger common mar- tural and Cohesion Funds. Yet, with the ket. Although unemployment rates have accession of the ten Eastern and South-East fallen continually from their mid-nineties European countries—including Bulgaria figure of 22%, Spain still has the EU’s sec- and Romania, whose accession is tabled for ond highest rate, with around 11%. The 2007—Spain could go in a short space of labour market is as segmented as ever: time from largest net receiver to net con- Short contract work—as opposed to long- tributor. According to estimates by the term, secure employment—constitutes EU Commission, the average per capita GDP more than 30% of total employment. In in the enlarged EU will sink by 12.5%. Based recent years Spain’s economic growth has on the present entitlement criteria and been driven mainly by growth in labour- extrapolations from the current data for an intensive areas like construction. In a com- EU of 27, it is probable that from 2007 only parison of the EU-15, only Portugal and four Spanish regions will meet the Objec- Greece have a lower level of productivity. tive I requirements (Andalusia and Extre- Expenditure for research and development, madura, as well as the Canaries, Melilla and which lies at around 1% of GDP, is well be- Ceuta). It is no accident that the phrase low the European average (1.93% of GDP). “statistical effect” was coined by Zapatero’s Although the costs of EU enlargement predecessor Aznar to describe the drop in are still hard to quantify, it is to be expect- income from the Structural and Cohesion ed that Spain will be particularly affected Funds resulting from the re-levelling of an due to a transfer of jobs—particularly in the enlarged EU’s GDP. industrial sector—, but also to the greater It is worth retaining for the Agenda 2007 competition it faces in key industries like negotiations that, from the point of view of textiles, and to Spain’s declining attrac- the current net-receivers, the expected tiveness as a source of cheap labour. partial reduction of European funds is also Possible gains from enlargement will be

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5 relativised thanks to the geographical prospect of long-term co-operation. Further, distance between Spain and the accession the Portuguese appear to have allayed their states, which is greater than for other fears about the potential for Spanish eco- member states. nomic domination. Both countries perceive themselves as markets with a rosy future, and which are worth mutually supporting. A New Iberian Togetherness? In this light, the Iberian Peninsula‘s elec- Despite the increasing dissolution of the tricity market (MIBEL) is to be developed cross-party consensus on European policy, and a high-speed train link (AVE) built be- structural factors do demand a far-reaching tween the two capitals. More meaningful is continuity. This continuity rests, for the the dynamising of trade: Portugal currently most part, on three axioms of European sends 25% of its exports to, and receives policy: firstly, a conception of the EU which 30% of its imports from its neighbour. Since stresses its redistributive character; second- labour costs in Portugal are half as high as ly, the defence of the countries’ institu- those in Spain, Portugal expects to gain the tional status in the organs of the EU; third- upper hand in direct competition with ly, the rejection of mechanisms of differen- Spain through the resettlement of busi- tial integration that might see the two nesses, which value having cheap supplies countries marginalised. in their home country. Spain, as the biggest The Eastern enlargement reinforces investor in Portugal (1992–2002 6.4bn Euro) these axioms. In particular, Spain’s position could take on an important function in in the enlarged Union is increasingly deter- driving up the productivity-rates of its smal- mined by an immanent contradiction: It is ler partner—something which the Portu- becoming more and more difficult for guese economy badly needs. Spain seems to Spain to reconcile its growing leadership represent the door for Portugal, through role, based on its hard won institutional which it can leave its peripheral position in status as a “large country”, with the equally Europe behind. unyielding defence of its status as the larg- Politically, the two countries are united est net-beneficiary. by their interest in the continued inflow of In terms of foreign policy, Portugal’s and monies from the European Structural and Spain’s positions have been “normalised” Cohesion Funds, which will amount to through their membership of the WEU and 22.8m Euro for Portugal and 56.3m Euro NATO. As regards European policy, both for Spain in the period 2000–2006. Both countries have successfully established countries plan to step up “arm in arm” to their place in the vanguard of countries the negotiations for the European financial which participate in all the large integra- perspective 2007–2013. tion projects. The accession of the consid- erably poorer Central and Mid-European states has reminded Spain and Portugal Openings for even more of their duty to play in the EU German European Policy the leadership role, which they have so Since the change of government in Madrid, striven for. Spain’s relationship with the Franco-Ger- Relations between Spain and Portugal, man tandem has considerably improved, which have traditionally been plagued by likewise its bilateral relations with Ger- petty jealousies and a mutual antipathy or many. All the signs are that the elections in indifference, could be about to make a step- Portugal will have a similar effect. In the change: For the first time in a long while, medium term then, the chances of a re- two Iberian governments with similar ideo- newed co-operation with both states in the logical orientations and goals in Europe can CFSP and Justice and Home Affairs areas develop common perspectives with the seem promising. At the same time though,

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6 the conflict over the distribution of fi- Area of Freedom, Security and Justice nances in Agenda 2007 threatens to flare With the Hague Programme, the EU’s inte- up again. rior and justice ministers agreed to a new long-term political agenda. Its particular focuses are the struggle against terrorism, European Foreign and Security Policy immigration policy and the integration of In foreign policy terms, those regions in the immigrants into the societies of the Union. Mediterranean and Latin America, where Spain will play a lead role in the realisa- Spain and Portugal traditionally enjoy most tion of the Hague Programme. Around 20% influence, could return to the heart of Euro- of all asylum-seekers reach the EU via pean co-operation policy. Out of economic Spain. A common European immigration interest alone, Lisbon and Madrid should be policy—including control over the EU’s motivated to improve their trade relations external borders—belongs to the ‘national’ with Latin America, and to embed these priorities of a Spanish and Portuguese durably within the concert of the EU both European policy. institutionally and legally. In a young and fast-developing policy The close link between Hispano-Portu- field like the area of freedom, security and guese and European interests in the Medi- justice, bilateral co-operation plays an im- terranean region is particularly conspicu- portant role. Intensive co-operation inside ous. Since the burden of dealing with for- the group of the largest member states eign and security concerns in the region (Germany, France, Spain, Britain and Italy cannot be shouldered by Spain and Portu- —the so-called G-5) could prepare the way gal alone—indeed can only be solved at the for compromise solutions at the European European level—the reorientation of His- level. However, the G-5‘s potential to play a pano-Portuguese foreign policy will bring leading role will be considerably reduced by new momentum to European foreign policy the divergent interests of its members. Re- and the relevant German initiatives. cently, Germany’s proposition of asylum Since it emerged that Moroccan nation- camps in North Africa—itself based on an als helped plan and carry out the terrorist original British proposal—foundered on the attacks of 11 March 2004, relations with the veto of France and Spain. In the run-up to Mediterranean region have gained a new further G-5 meetings, Germany should in meaning. The management of the chal- future use informal bi- and trilateral initia- lenges there which are currently so press- tives to gauge the feasibility of its ventures. ing—namely the struggle against terrorism One candidate for this treatment would be and stemming the flow of illegal immi- the co-operation between Berlin, Madrid grants—is also in Germany’s interests. More- and Paris on the creation of an electronic over, the economic and energy interests of register of criminal records. the two southerly member states do not The new Spanish and Portuguese gov- clash with Germany’s own priorities. A ernment offer Germany the chance to win solution to these complex problems cannot back two traditionally important European be achieved bilaterally, but rather within partners, and thereby to alleviate the lead- the framework of a formative European ership crisis in the Franco-German tandem. policy for the Mediterranean region. Ger- Not only Germany, but the whole EU have man foreign and security policy actors will much to gain from a reinforced Spanish also be galvanised by a desire to counter- and Portuguese role, in terms of foreign balance individual French, Spanish and policy credibility and autonomy. This is Portuguese interests in the region. Ger- particularly true of Europe’s Latin Ameri- many could then take on the role of a can policy and the forgotten Southern di- mediator, enjoying the trust of all three mension of European foreign policy. The parties. tenth anniversary of the Barcelona Process

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7 in mid-2005 could be the trigger for a resuscitation of the Euro-Mediterranean dialogue. This is all the more important since the sustainable realisation of an area of freedom, security and justice is scarcely conceivable without a functioning Euro- Mediterranean dialogue. Coupling Spain and Portugal to the Franco-German tandem could not only compensate for its loss of formative power in the enlarged EU, but also build the enlarged EU’s capacity to be steered.

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