COUNTDOWN TO CATASTROPHE?

At first glance, the timing for the German election now likely to take place this autumn could hardly be worse for the EU. With Chancellor Schroeder in pre-election mode, it would seem to make the prospects of an agreement next month on the EU's spending plans even more remote.

Never before have the EU's periodic negotiations on its financial perspective been so bedevilled by extraneous events. First the UK general election put everything on hold from early this spring. And by the time that was settled, the negative signals from France on its upcoming referendum on the EU constitutional treaty were already inhibiting EU debate, discouraging any decisive action likely to prejudice a Yes vote.

Hopes of calmer water after the French result were then clouded by similar anxieties over the Dutch referendum, prolonging EU indecision further. "But at least once those two referendums are over, there will still be time to reach a budget agreement before the end of the Luxembourg Presidency", optimists had been remarking to one another.

Until this week, that is.

Is the EU heading for catastrophe, with renewed postponement of a budget agreement, and a strong likelihood of popular rejection of its new treaty?

Not necessarily. In fact, the current threats could turn out to be blessings in disguise, if they prompt the EU and its member states to a new degree of realism.

A No...