Lisbon takes the EU baton

Portuguese Prime Minister Jose Socrates may feel uneasy when German Chancellor Angela Merkel hands him the baton of the six-month European Union presidency on Sunday. Portugal has held the position twice before. On both occasions, the distraction from domestic politics brought the government down.

This time around, things are looking unhealthy on the domestic front again. Socrates had a budget deficit of 6.8% of GDP when he took office in 2005. He has demonstrated steely determination in his measures to bring this down, cutting nearly all areas of government spending, raising the retirement age for civil servants and hiking VAT. Teachers and public servants have taken to  the streets in protest, and although the deficit is now within range of the EU's 3% limit, continued sluggish growth means that further spending cuts and demonstrations are on the cards.

Socrates will be accordingly wary of any European moves that could destabilise his government at home. This suggests that a scaled-back EU agenda is more likely than an ambitious one. Even if Socrates had big plans for the Portuguese presidency, the country lacks the clout enjoyed by Merkel on issues such as climate change and EU-Russia relations. With challenges such as Kosovo, Turkey and a successor to the Kyoto Protocol on the horizon, the loss of negotiating power will be keenly felt in Brussels. 

Portugal could make its mark in other areas:

• With other southern European states, it is on the frontline of illegal seaborne immigration from Africa. It could therefore  push debate on the issue to the forefront of the agenda in Brussels.
• Lisbon might then lay the foundations for the 'Mediterranean Union' envisioned by French President Nicholas Sarkozy, a trade agreement and framework of summits that would bring Mediterranean Europe together with North African and Middle Eastern states. Sarkozy even thinks that the idea could tackle the Middle East crisis by uniting Israel, its neighbours and European states in a new forum.

Socrates may prefer the EU to look south rather than east. He will be more confident in his Mediterranean focus knowing that Sarkozy is right behind him and ready to sustain the momentum. This time next year, France takes the president's chair.