EUROPEAN DIARY: Meeting visiting heads of government is one of Mr Romano Prodi's routine tasks as President of the European Commission. But his dinner last night with Germany's Chancellor, Mr Gerhard Schröder, at a secret venue in Brussels was anything but run of the mill.
For a start, Mr Prodi originally offered to meet the chancellor in Berlin, promising to take with him a number of commissioners who have been targets for Mr Schröder's criticism. But when Mr Frits Bolkestein, the commissioner in charge of the internal market, refused to go, the venue was changed to Brussels.
Mr Bolkestein was at yesterday's dinner, along with the Environment Commissioner, Ms Margot Wallström, the Competition Commissioner, Mr Mario Monti, and the Enterprise Commissioner, Mr Erkki Likkanen.
Mr Schröder came to Brussels to talk about the EU's industrial policy and to complain that too many decisions taken in Brussels damage the competitiveness of European industry. He is especially concerned about environmental rules that affect the chemicals industry and a proposed directive on corporate takeovers that could leave companies more vulnerable to hostile buy-outs.
The chancellor has been privately scathing about the Commission in recent weeks, complaining that its decisions are biased against Germany. He adopted a more measured tone in an article in the Financial Times yesterday, calling for a broader discussion on the EU's industrial policy.
"Europe's politicians need to listen more closely to the needs of industry. Germany, a net exporter, has no need to fear competition in world markets. But Europe must attach greater importance to manufacturing and industrial production as a source of innovation and growth. Otherwise we will have thrown away one of our strongest assets," Mr Schröder wrote.
Last night's meeting came amid growing anxiety in Brussels that the Franco-German axis, long the motor for European integration, may be moving into reverse gear. Both Paris and Berlin are engaged in wrangles with the Commission over calls to reduce national subsidies that could distort the single market.
Germany wants to retain its subsidies to the coal industry, while France is fighting to preserve tax concessions on diesel fuel for lorry drivers. Germany has hinted it will support France in the tax battle, in return for French backing for Berlin's coal subsidies.
Earlier this year, Mr Schröder used all his political muscle to thwart the Commission's attempt to issue Germany with an official warning about the size of its budget deficit. Critics said the chancellor was willing to damage the credibility of the euro's Stability and Growth Pact to protect his own political interests.
With a general election due in September, Mr Schröder and his conservative rival, Mr Edmund Stoiber, both know they will lose few votes by criticising Brussels. And regardless of the outcome of France's National Assembly elections, few observers believe Paris will push vigorously for more European integration in the foreseeable future.
Whoever wins September's election in Germany, the next chancellor will be determined to reduce Berlin's net contribution to EU funds. To this end, Germany has persuaded Finland to swap the dates for their next stints in the EU presidency.
Instead of occupying the presidency in the second half of 2006, Germany will now do so for the first half of 2007. The official reason behind the change is that Germany will hold federal elections in late 2006. But it will have the equally important effect of ensuring that Germany is not chairing the next big negotiations on the EU budget.
Freed of the responsibility for ensuring that a deal is agreed, Berlin is likely to push for a major overhaul of the budget, which could spell the end of big EU subsidies to farmers.
The fact that Berlin is planning so far ahead is evidence of how high the stakes will be in the budget negotiations. Many German politicians believe that budget reform is essential if German citizens are to rediscover their deep commitment to the European project.
The Convention on the Future of Europe is examining ways of bringing the EU closer to its citizens. Mr Schröder's message for the commissioners is they could prevent much hostility to Brussels by showing a little more flexibility and a lot more common sense.
