New leadership seeks to rebuild EU self-confidence

By Paul Taylor BRUSSELS (Reuters) - Short, snappy and focused on two priorities - reviving sagging investment in Europe and standing firm towards Russia, the first European Union summit under new leadership was a demonstrative break with the past. Donald Tusk, the former Polish prime minister who took over the chairmanship of the 28-nation European Council this month, put his briskly opinionated stamp on the meeting of EU leaders, sending them home a day early after a show of unity and purpose. In his first month, he has shown he intends to be a major player in EU foreign policy, driving an Atlanticist agenda of free trade with the United States, partnership with NATO, toughness with Russia and cautious cooperation with China. German Chancellor Angela Merkel, the most powerful EU leader, was delighted with the first steps of her protege, a fellow conservative from a country which like her native East Germany cast off Soviet Communist domination in 1989. She praised "a shorter, more succinct, well organised Council meeting under our new president Donald Tusk". Indeed Tusk opened the summit without Merkel and French President Francois Hollande after they kept other leaders waiting while they met in private, participants said. Departing from the self-effacing, consensual style of his Belgian predecessor Herman Van Rompuy, Tusk made clear publicly in advance he wanted a firm line on maintaining economic sanctions on Russia, which he called "our strategic problem". The former Solidarity student union activist and anti-communist political organiser said Europeans should regain their self-confidence and realise their own strengths. "The biggest challenge today is the Russian approach, not only to Ukraine but also to the EU," he said. One EU official described the contrast between Van Rompuy and Tusk as "old school versus business school", although the Pole is a political bruiser rather than an economist. When ambassadors met the next morning to review the new summit format, there was unanimous praise for Tusk's strict chairmanship, which returned the European Council to its intended role of giving strategic guidance to the EU on a handful of key issues instead of a laundry list of problems. He prevented leaders making long speeches or getting involved in rewriting the final statement, as often happens. "They were happy the drafting was left to civil servants and they weren't asked to get involved," an EU diplomat said. Whether that discipline will hold when serious issues of money and power are at stake remains to be seen. Tusk's clear line on Russia masked differences between hawks who want to maintain or step up sanctions, and doves such as France and Italy, keen to ease them at the first sign of Russian cooperation to stabilise eastern Ukraine. Those divergences may widen in mid-2015 when the EU has to review the curbs on finance, arms sales and technology transfer imposed initially for 12 months. Tusk was careful not to oversell the initiative to stimulate private investment in Europe's stalled economy proposed by new European Commission President Jean-Claude Juncker, saying it was "no silver bullet" but a first step to restore confidence. EU leaders endorsed the plan intended to plough 315 billion euros into transport, energy, research and small business, but some demanded a say on which projects are funded. Brussels, in agreement with investors, wants to keep decisions in the hands of European Investment Bank experts to avoid financing national politicians' pet schemes. This may be a first test of whether Europe's new leadership can resist pressure to renationalise decision making. The euro zone crisis of 2010-2013 changed the balance of power in the EU, giving more say to national governments that hold the purse strings and less to the Commission, which has seen its sole right to initiate EU legislation gradually eroded. Juncker has bent to the prevailing Eurosceptic winds, announcing a work programme last week that will withdraw 80 pieces of planned regulation, including clean air and waste management rules, and propose only 25 new initiatives next year. He and Tusk have opted to take issues off the table where they perceive there is little chance of agreement. But centrifugal forces are still hard at work, now tugging at the Commission's core competences of policing competition, upholding single market rules and negotiating trade deals. To be sure, it's not all one-way traffic. The Commission has gained more oversight over national budget deficits, although its powers are being tested by defiance from Paris and Rome. The European Central Bank, the federal institution in charge of the 18-nation euro single currency, has acquired more power during the crisis, not just as the de facto backstop for the euro zone but also by gaining control of banking supervision. Yet the ECB too faces a backlash from some governments and national central banks, notably in Germany and the Netherlands, which are trying to clip its wings and inhibit it printing money to buy government bonds in its effort to revive inflation. Europe's new start will be put to the test in 2015 by monetary controversy, potential political upheaval and economic stagnation. Tusk and Juncker have won plaudits in their first weeks in office, but the real ordeal is still to come. (Additional reporting by Alastair Macdonald, Jan Strupczewski and Francesco Guarascio; Writing by Paul Taylor; editing by Ralph Boulton)