A successful summit

After frantic negotiations, the European Council summit has ended with success on a number of fronts, with agreement on how to tackle both long and short-term political problems.

The summit ended with agreements that will enable the EU to meet its previously agreed targets (to cut carbon emissions by 20%, to increase use of renewable energy by 20%, and also achieve a cut of 20% in energy use by 2020 as compared with 1990 levels).

Given the strident opposition from several eastern European countries and Italian Prime Minister Silvio Berlusconi, it is an impressive feat that a deal was reached. Indeed, John Kerry as US representative at the UN climate conference in Poznan, has already described the deal as "an enormous act of leadership". The package also enables the EU to revive its pledge to cut emissions by 30% provided the UN climate change conference in Copenhagen next year agrees to a new deal as well.

The other pressing problem facing the summit was how to tackle the financial crisis and economic downturn. Despite the apparent spat between our Government and the Germans on how best to respond, EU leaders have announced a €200 billion stimulus package - the equivalent of roughly 1.5% of total gross domestic product in the EU. Although the precise details of the package will be ironed out over the next few days, they will include a combination of tax cuts,extra financial support for small businesses and an acceleration of public spending projects. Although individual Member States will be able to opt-out of specific measures with which they disagree, it is good news that, rather than leave all countries to 'go it alone' and so increasing economic turmoil, EU countries have come together to seek a co-ordinated response.

The discussion of how to salvage the Lisbon Treaty was, to most, the least important item on the agenda at this week's European summit - no one would argue that the EU's institutional framework is more important than the future of the planet and mitigating the effects of the economic downturn. But the deal struck maintains the package of institutional reforms that will allow the EU to be better able to deal with these long-term political problems. As I reported yesterday, the Irish government can claim a notable diplomatic victory and the 27 governments can show that the issues raised in the no campaign have been listened to and responded to.

Am in Berlin to talk to the German government and MPs on the new EU treaty. Can the Germans (whose turn it is to chair) deliver a compromise between the 22 Member States which want to keep the Constitutional Treaty intact (18 of which have already ratified it) and the two that have rejected it, while also satisfying those like Britain which have not yet ratified?

The game plan is clear: make as few changes to the original package as possible, but as many as necessary to secure agreement.

Obviously, I (and a majority in Parliament) would prefer changes of symbol to substance, of wording to content, in order to preserve the main reforms contained in the Constitutional Treaty. So, if the treaty is to be an amendment to the current treaties, rather than a codifying replacement "constitution", so be it. But if some substance does have to be sacrificed, let us at least keep those reforms that make the EU system more efficient, capable of delivering on those policies that we agree should be conducted at European level, and those which enhance its democratic accountability.

This is clearly the approach of Chancellor Merkel and her Foreign Secretary, acting as presidency deal-brokers. Good luck to them! They still have to overcome considerable divergence on the scope of the changes needed, from Poland's demand to revise the voting strengths in the Council of Ministers to the Dutch request to change the nature of the reference to fundamental rights. But the Germans remain optimistic that a deal can be made.

Germany's own position is simpler. The President of the Bundestag told me that they are happy to transfer sovereignty to the European Union on matters where common European policies are beneficial, provided such powers are not given to ministers and commissioners alone, but to the European Parliament. Would that it were so simple!

I'm somewhat apprehensive of the 'Grand Coalition' government being formed in Germany. What will happen when it becomes unpopular - as all governments do, but this one perhaps more quickly than others given its need to compromise widely differing views?

If both main parties are sharing the blame and voters want to vote for the opposition, it could mean that the extreme parties will do well. The only time the neo-nazi NPD ever came close to reaching the 5% threshold for representation in the Bundestag was during the last Grand Coalition in 1967-69. There's a danger that, this time, disaffected CDU/CSU supporters vote for the far right and disaffected SPD supporters vote for the former communist “Left Party”. This in turn would make coalitions other than a grand coalition more difficult to achieve, and a vicious circle would be started. Let’s hope it doesn't get that bad.

The German election results are most interesting.

Far from being the predicted landslide for the Conservatives (CDU) and meltdown for Chancellor Schröder’s Social Democrats (SPD), the campaign allowed the latter to steadily regain ground and come to within about three seats of the former. It might yet be even tighter, as the poll in one seat (Dresden) was postponed due to the death of a candidate (just as in South Staffordshire in Britain!) and this seat is likely to be won by the Social Democrats, with a corresponding effect on the top-up proportional seats. In other words, it's a virtual dead-heat!

However, even with their preferred coalition partners (the Greens for the Social Democrats and the Liberals for the Conservatives), neither side has a majority. The balance is held by the Left party – largely the former East German Communists.

What seems to be happening at present is that everyone is ruling out the various alternative coalition options:

• No-one wants to make a deal with the Left Party.


• A “grand coalition” has been ruled out by Schröder (rightly so in my view: a coalition of opposites is bound to run into trouble, and if people later want to vote against the government, they have only extremist parties to vote for).


• A Socialist-Green-Liberal coalition has been ruled out by the Liberals.


• Neither the Liberals nor the Greens are very keen on a Conservative-Liberal-Green coalition (perhaps they have observed what has happened to Leeds City Council!).

So what will happen? The Chancellor (their equivalent of Prime Minister) is elected by the Bundestag (equivalent to our House of Commons) by a majority of all elected members (as opposed to a mere majority of those voting – a requirement that has in the past occasionally forced ill or pregnant members to attend when votes are likely to be close). This takes place in a secret ballot on a proposal of the Federal President. If the person proposed by the President is not elected, the Bundestag has 14 days to elect another candidate, also by a majority of its members. If no-one reaches this majority after 14 days, then a new ballot takes place in which the person obtaining the largest number of votes is elected. If the person elected obtained the votes of the majority of the members of the Bundestag, the President must appoint him as Chancellor, but if the person elected does not receive this majority, the President may either appoint him or her, or dissolve the Bundestag and call a new general election.

This means that it is possible to have a minority government, if the President appoints a Chancellor without the necessary majority. Not many people know this, however, as it's never happened since the restoration of democracy after the war. (Today, I even had to point it out to a German MEP spokesman on constitutional affairs!)

A minority Conservative-Liberal coalition could therefore elect their candidate (presumably Frau Merkel) for Chancellor 14 days after the Bundestag re-assembles. It could govern, but it would have to bargain with one or another opposition parties whenever it wanted to get legislation through the Bundestag - just as the previous government had to bargain to get its legislation through the upper house.

A Social Democrat-Green coalition, however, would require the support of some others to elect their candidate for Chancellor (presumably Herr Schröder). For instance, the Left Party could say that, while not joining the government, they would be willing to vote for Schröder rather than see Merkel form a government. He too would have to bargain to see its legislation get through, but perhaps with more options.

Schröder sees that his economic reforms, which were initially unpopular among traditional Social Democrat voters, are beginning to bear fruit. Germany has just become the world’s largest exporter and unemployment is beginning to fall. That's why voters returned to backing him in unexpectedly high numbers.

He sees that he occupies the middle ground between the consrevative-liberal alliance who wanted faster, harsher reforms and the Left Party who opposed any reforms. Neither the right nor the left alternative to Schröder gained a majority. Politically, he feels vindicated. Legally, the constitution allows him a way to get back. And if the President prefers to call a new election rather than have a minority government, he is equally well placed to build on the momentum of his comeback. We will watch the situation unfold with interest!