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12. July 2007

Pure theatre from two master illusionists

Isn't it a pleasure to be a European?

"I don't think we were diddled, fooled, done over," said a sombre Joaquín Almunia, EU economic and monetary affairs commissioner, summing up on the day after the blitz visit of Sarko to the 13-strong "Eurogroup" of finance ministers on Monday night. 

Mon oeil - or pull the other one as we say.  

The sight of Jean-Claude Juncker, Luxembourg premier and Eurogroup chairman, embracing French president Nicolas Sarkozy may not have been grand guignol but it was pure theatre - from two master illusionists.

After effusively welcoming a "night visitor", the Grand Duchy veteran went out of his way to reassure him and the gaping, guffawing hacks that Sarko's plans to defer balancing the French budget to "at the latest" 2012 - rather than the stipulated 2010 - was wholly within the rules of the revised stability and growth pact governing the eurozone.  

"I believe in the pact," said Sarko. "I'm simply asking for an intelligent and dynamic application of the pact ... as France will put in place the reforms that Europe has been waiting for from her for so long."  

So did he get away with it?

The workings of the pact - revised in 2005 - are arcane because they are politically devious and have been subject to chicanery in recent years, allowing Germany and France, the eurozone's two biggest economies, to escape without fines despite busting the rules for four years in a row.  

Now virtuous Germany, in the person of ultra-orthodox finance priest Peer Steinbrück with his projected 0.5% deficit this year, is admonishing Sarko to set an example, stick to the rules and deliver on time.  

Others, including Italy, singled out this week as so often before for breaking the pact's criteria, feel the same.  

Steinbrück at least had the grace to admit that a previous (underlined 10 times) administration (of his own party) had hardly been a model player in 2003, drumming up enough support to escape censure. But, he glowered, no more.  

"We don't need any more reforms but should follow the rules of the game ... If the pact's obligations and disciplinary power are weakened it impacts on the domestic policies of other countries..."  

Memo to Sarko: don't you dare or I'm buggered at home.  

Almunia, the pact's stern guardian, said he had lectured the French president that budgetary discipline and reform were not irreconcilable but went hand in hand and ensured growth and jobs.  

But he duly admitted that Sarko is not breaking the rules - yet - and had promised to present a model programme of reforms in September.  

"Compared with the attitudes of some countries in 2003 the situation now is completely different: nobody will dare to provoke a crisis in the pact," he intoned - sitting beside an equally grim Fernando Teixeira dos Santos, the Portuguese minister chairing the meeting, who nodded solemnly.  

Portugal, of course, is a serial sinner as regards the pact ... Ecofin, the new farcical comedy.  

The Austro-Hungarian empire cannot be revived  

While Sarko is chasing around France and, now, North Africa, trying to sort out the floundering €90bn merger between Suez and Gaz de France, bringing in perhaps EDF, Total or Sonatrach, the Algerian gas company, the Austrians are fruitlessly trying to engineer their own big energy group in central Europe.

OMV, in which the Austrian government is the largest shareholder with 31.5%, has built up an 18.6% stake in Hungarian oil and gas firm MOL and has offered a friendly takeover. 

Oh, Vienna! You mean nothing to us, respond the Magyars, who have bought up 30% of their own shares and parked them with some strange bedfellows as the rules limit MOL's stake to 10% of itself.  

Gyorgy Mosonyi, MOL chief executive, said this would be no merger of equals and, anyway, it would reduce competition in the region. In true EU fashion the Hungarian premier Ferenc Gyurcsány has said the offer can hardly be friendly when it's from a state-owned foreign - fellow European, in truth - firm trying to make a hostile takeover. Shades of Eon and Endesa.  

But, in the energy-starved Europe, the plot thickens.  

This is not just an everyday takeover tale of consolidation. The two groups are heavily involved in Nabucco, the planned pipline linking gas-rich central Asia with south-east Europe that bypasses Russia and is seen by the EU as a more than useful instrument in the battle to reduce dependence on Putin, Gazprom and the other oligarch-run enterprises.  

Gazprom, it just so happens, has signed a deal with Italy's state-owned Eni to build a rival €10bn pipeline running under the Black Sea through Bulgaria and Greece to southern Italy. The pipeline would also undercut Turkey's plans to transport gas under the Caspian to Europe.  

MOL suspects that OMV is working hand in glove with Gazprom in its takeover approach while both, meanwhile, have shown interest in South Stream - and are working on Nabucco.  

Robert Amsterdam, the Canadian international lawyer who was retained by Mikhail Khodorkhovsky, the jailed Yukos chief, has said: "It would be inappropriate to argue that OMV is just another ambassador for Russian interests in Europe but it is clear where the Austrians (who get 80% of their gas from the Russian bear) place their loyalty."  

He suspects that OMV and MOL are fighting to be the prime partner of Gazprom in developing its central European hub.  

Given that the Greeks and the Bulgarians and even the Turks are showing interest in South Stream, it's pretty obvious that the EU's drive for a unified energy policy and single market is hardly worth the paper it's written on in the face of the Kremlin-backed offensive.  

Seamless rail travel across Europe? Huh!

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