Posted Sunday, January 25, 2004; 14.53GMT Not everything was radically different at Davos this year — the snow was still falling hard, the movers and shakers were networking furiously and there was still a bear in the woods to worry about. But it was a much happier forest — and a different bear. Last year, leaders from Europe and much of the rest of the world faced off against the hegemon of the hour, the U.S., over its plan to oust Saddam Hussein. This year the World Economic Forum's annual meeting took place against the backdrop of a more subtle debate within Europe itself over the countries some see as the hegemons in their midst: Germany and France.
Amid a mood of cautious optimism and transatlantic cooperation (see next story), many sessions were marked by small signs of tension over the question of who is driving Europe. At one lunch, the leader of an E.U. member-state-to-be bristled when a panelist referred to Britain, France and Germany as the leaders of European policy. At another discussion, Polish President Aleksander Kwasniewski complained that the E.U.'s constitutional debate late last year had brought "a deepening of the democratic deficit. The new countries were not brought into the discussion until the very end. [New E.U. member states] think the Germans and French want to have more power and dictate terms to us. This lack of solidarity and confidence is the main problem for Europe." Spanish Foreign Minister Ana Palacio told TIME that some in France and Germany "are nostalgic for the small, old, comfy Europe and feel vertigo when they see it now."
The idea of a cozy "core Europe" — with France and Germany at the center moving quickly ahead with joint policies, while slower states bring up the rear — was once seen as a spur to closer integration. Now, says former Christian Democrat party leader Wolfgang Schäuble, who coined the phrase with Karl Lamers in 1994, "the term is used as a threat, as if to say, 'If you're not ready, then we'll just do it on our own.'" And going it alone is exactly what France and Germany have done. Two weeks ago the European Commission announced that France and Germany (and Belgium) have the worst records in the E.U. when it comes to transposing laws on the single market into national legislation. Neither France nor Germany are among the eight E.U. countries that implemented the new European Arrest Warrant, a linchpin in the coordination of justice affairs. And the Commission is taking the European Council, the Brussels body representing E.U. states, to court over how members agreed last November to let Germany and France off easy after they busted common rules on budgetary discipline.
If many now see a "core Europe" more as a threat than a promise, part of the reason is because the Franco-German engine isn't what it used to be. Germany's economy is stalled and the French public is less than enthusiastic about the admission of 10 new members in May. "Germany and France no longer have the moral high ground," says Daniel Gros, director of the Center for European Policy Studies, a Brussels think tank. Because the two countries often had widely diverging views — on relations with the U.S., on state intervention and on the framework for the euro — a compromise between them could usually be embraced by a majority of the others, he points out. No longer.
Now France and Germany are often together from the start, holding positions the others can't accept. The debate on Iraq set the tone, pitting France, Germany and a few smaller acolytes against Britain and much of Central Europe. "Trust was damaged because [France and Germany] told everyone that those who don't share our opinion are not good Europeans," Schäuble says. The contretemps over budget deficits repeated the same pattern, although for entirely different reasons. Smaller states like the Netherlands and Austria asked: Why should we make sacrifices to meet budget constraints when the euro zone's two biggest economies get a free ride? "We should take our rules seriously," Dutch Prime Minister Jan Peter Balkenende said at Davos. "It is a matter of being fair."
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Not everything was radically different at Davos this year — the snow was still falling hard, the movers and shakers were networking furiously and there was still a bear in the woods to worry about. But it was a much happier forest — and a different bear. Last year, leaders from Europe and much of the rest of the world faced off against the hegemon of the hour, the U.S., over its plan to oust Saddam Hussein. This year the World Economic Forum's annual meeting took place against the backdrop of a more subtle debate within Europe itself over the countries some see as the hegemons in their midst: Germany and France. 
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