Czechs take EU helm from fringe as crises rage

The Czechs have a tough act to follow when they take the helm of the European Union today after French President Nicolas Sarkozy's energetic stint.

Facing the worst economic crisis in generations, a stalled process to streamline decision-making, thorny ties with Russia, and June European Parliament elections, many EU leaders say strong leadership now is not a luxury but a necessity.

But unlike France, which under Mr Sarkozy launched a string of initiatives, albeit with mixed results, on issues such as the economic crisis and climate change, the Czechs have been far from the forefront of the drive for deeper integration.

Led by a weak, staunchly pro-US minority government, the ex-communist state of 10.4 million has not yet ratified the EU's Lisbon reform treaty, is in no rush to adopt the euro currency and is cautious on any shift of power to Brussels from the national level. Add to that the Czech President, Vaclav Klaus, who has made EU-bashing one of his core topics and refuses to hoist the EU flag at Prague Castle, and a picture of scepticism unfolds that pundits say could cause problems when the EU needs them least.

"The fact that he holds these views makes it difficult to run the presidency," said Robin Shepherd, senior fellow for Europe at Chatham House, a London-based think-tank.

"Klaus is not the head of government... but he is the public face of the Czech Republic."

Mr Klaus's position at home is mostly ceremonial. He does not drive policy and will lead few events under the presidency.

But he is likely to snipe at what he sees as undemocratic attempts to form a European superstate, as he did in a Christmas Eve address when he said politicians like Mr Sarkozy hurt Europe by showing too little respect for individual states' sovereignty.

Factbox

Financial crisis

As EU President, the Czechs should lead the debate on the response to the financial crisis and economic recession.

This may be difficult as heavyweights Britain, Germany and France will want to have a decisive say on the matter. The Czech Republic remains outside the eurozone, so it does not take part in monthly meetings of the euro area's finance ministers, seen as key to forging deals when the EU's 27 finance ministers meet.

The Czechs, being economically liberal after decades of communism, have said they would oppose any bold government spending or ownership plans; they are in favour of smaller, targeted initiatives with limited time horizons.

Small size

The Czech Republic's small size makes it difficult for Prague to be a strong partner in talks with powers such as China and Russia, for example on trade, or to help solve unexpected crises, like the Georgian-Russian war.

Diplomacy

The Presidency will be tasked with preparing summits with new US President Barack Obama, Russian leaders and China. The Czechs want to make the EU more active in solving the Middle East conflict and plan to hold a summit with Israel. They are expected to launch the EU's new eastern partnership programme for countries such as Ukraine and Georgia.

Climate

Having agreed on its own package to fight climate change, the EU should play a key role in global talks on the issue, which will culminate in final talks in Copenhagen in December.

Energy

The Czechs have set energy as one of their priorities, and want to lead debate on better supply security and interconnection of power grids.

European elections

Elections to the European Parliament will be held in June. With campaigning expected to dominate April and May, all major decisions should be pushed through the assembly by end-March.

Lisbon treaty

The Czechs are tasked with reviving the treaty by ratifying it themselves and overseeing the drafting of assurances for Ireland so it can hold a second referendum on the charter.

The Czech Parliament, one of the few EU chambers yet to have ratified the treaty, is expected to debate it in February.

Enlargement

Overseeing the final phase of EU membership talks with Croatia, with some EU countries sceptical towards the executive European Commission's conditional proposal to conclude the talks in 2009. Making progress in accession talks with Turkey.

The Czechs are keen on enlargement and hope to oversee progress with Croatia and a membership application from Serbia.

Regulation

The Czech will face an uphill struggle in trying to clinch a compromise among divided EU states on reduced rates for value added tax, the Solvency 2 package reforming the insurance sector, new rules for credit rating agencies and tougher capital requirements for banks. The EU may also start a debate on regulating hedge funds.

The Czechs have made clear their general position on being cautious in reining in the free market and will be vary of any bold regulation initiatives.