EUROPEAN COUNCIL : FRANCO-GERMAN COMPETITIVENESS PLAN RUNS INTO TROUBLE.

MEPs and trade unionists have poured cold water on a Franco-German bid to harmonise labour, pension and tax policies across the bloc, accusing Paris and Berlin of sidelining the European Commission and heaping more pressure on ordinary taxpayers. The EU's leaders agreed, on 4 February, that European Council President Herman Van Rompuy should begin consultations with governments on the so-called pact for competitiveness', with a view to taking "further steps to achieve a new quality of economic policy coordination in the euro area". However, national fault lines emerged at the fraught talks, with countries including Belgium, Luxembourg, Spain, Ireland and Poland expressing doubts over specific proposals contained in the plan.

German Chancellor Angela Merkel and French President Nicolas Sarkozy turned up at the summit with a list of demands, which they outlined to the press before they met with their EU counterparts. Although no formal proposal was put on the table, the plan is essentially a bid to introduce German-style labour market and fiscal policies - including constitutional borrowing limits, higher retirement ages, the abolition of inflation-linked salaries and a move to harmonise the way business taxes are calculated (the common consolidated corporate tax base) - in Europe's less "competitive" economies. "We should not orient ourselves along the lines of the average performance in the EU, or countries that find themselves in a difficult position, but we should always strive for more, to be more ambitious," Merkel told reporters after the summit had finished.

But MEPs from the Socialists to the Greens have cried out that the measures will stymie growth and hamper the Commission's own work. ALDE group leader Guy Verhofstadt (Belgium) said in a statement after the talks, "Though it is more than time to start addressing the lack of economic policy coordination within the eurozone, the sidelining of the European Commission is unacceptable," complaining that the European Council does not work in the Union's interest. The head of the Party of European Socialists, former MEP Poul Nyrup Rasmussen, went one step further, alleging that the pact is an "insult to millions of Europeans" already working hard to beat the crisis. "How are ordinary people to be expected to make yet more sacrifices on retirement, on wages and on social benefits when they are yet to see any tough measures taken to control the financial sector, or even have that sector...