Leaders squabble as Sarkozy claims EU victory

European Union leaders fell to squabbling yesterday about the meaning and scope of the outline treaty on EU "reform" agreed in Brussels in the early hours of Saturday.

The French President, Nicolas Sarkozy, made claims - which will anger Britain and other free market supporters - for the significance of a change that he imposed in the treaty's preamble.

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M. Sarkozy had successfully insisted on removing a reference to "free and undistorted competition" as one of the principal aims of the EU. Speaking at the Le Bourget air show at the weekend, he said that this meant the "end of competition as an ideology and a dogma" in Europe.

He said EU governments now could - and must - create an "industrial policy" to protect "European champion" companies - like Airbus - against "unfair" competition from outside the EU

This goes far beyond the "cosmetic" interpretation put forward by Tony Blair and senior officials of the European Commission. They insist the disappearance of the words does not alter the legal basis for free and unsubsidised competition within the EU (which is mentioned in 13 other places in European treaties). The importance of competition policy - such as preventing unfair subsidies and cartels - was stressed in a protocol added to the treaty, they said.

President Sarkozy is partly playing to his own domestic gallery. He needs left-wing MPs to push the EU "reform" treaty through parliament without another referendum. It was mostly French left-wing voters who rejected the proposed EU constitution as ultra-liberale or "ultra-capitalist" two years ago.

All the same, President Sarkozy, emboldened by his success in Brussels, is plainly preparing an offensive for a more "protectionist" Europe - something which will bring him into direct conflict with Gordon Brown. At the Le Bourget show he also called for a "carbon tax" on imports from countries which fail to respond to climate change. He repeated his desire for "political" interference to push down the exchange rate of the euro.

The Italian Prime Minister, and former Commission president, Romano Prodi, complained bitterly yesterday about the "lack of common European spirit" betrayed by the late-night haggling. He singled out Britain and Poland but also criticised the Czechs and the Dutch for putting "national interests" ahead of "European goals". "As a European, allow me to be embittered for the spectacle I find before me," he said.

But who really won and lost at the Brussels summit, which ended at 4.30am on Saturday?

The French press at the weekend claimed, in fawning tones, that President Sarkozy had emerged as the dominant character. They said that, without his insistence on further concessions to the Poles on voting rights, the summit would have ended in a partial and dangerous stalemate.

Other EU officials singled out the German Chancellor, Angela Merkel, who displayed extraordinary skill in weaving between the competing demands. Unlike many other previous summit presidents, they said, she had shown herself prepared to involve other senior leaders in the tense negotiations with the Poles.

As for details of the agreement itself, Mr Prodi has a point. This was supposed to be a "simplified" version of a constitution designed to "streamline" EU decision making. The result - still to be discussed in more detail by ministers and senior officials - is confusing to say the least.

One of the main changes - bitterly contested by Poland - was to have been the introduction of a "double majority" for decisions by governments in the council of ministers. Instead of the old system of votes weighted vaguely according to a nation's size, majority decisions would need 55 per cent of states, representing 65 per cent of the EU population.

To buy off the Poles, it was finally agreed that the new voting rules would not apply before 2014 and that the Poles could insist on using the old system until 2017.

Britain won an exemption from the charter of fundamental social rights and an a la carte system of "opt-ins" and "opt-outs" for decisions which might impinge on British criminal law.

Some important changes have been carried over from the de-railed constitution. There will be fewer commissioners; a European Council president chosen for 30 months, instead of rotating between capitals every six months; and the extension of majority voting to 40 new areas.