The surge in world food prices, oil prices at well over $110 a barrel and measures to boost the use of biofuels in the US and Europe are putting policy-makers into crisis mode.
 
It is extraordinary how this situation has taken fire in just a few months and how intertwined the different factors are. A perfect storm, indeed. International organisations warn that the rising cost of food will threaten the stability of nations, especially developing countries. Even for a country like China food inflation is a major threat to the government.  A “silent tsunami” is how the head of the World Food Programme has described the global situation.
 
The European Commission has responded with an increase in emergency food aid, just as it should, but we are witnessing more than a short-term crisis. Commissioner Louis Michel pulled no punches when he spoke to the European Parliament recently. While announcing an increase in EU food aid spending to nearly €300m so far this year, he also warned just how dangerous the international situation was becoming.

The current food price situation focuses attention on the future of the common agricultural policy. You might think that high market prices for cereals (somewhat mitigated by the strength of the euro) would reduce the need to spend European taxpayers’ money on expensive support arrangements for EU agriculture, but that’s not how French farm minister Michel Barnier sees it.
 
For him the present situation proves the need for an expensive protectionist policy. He even urges other countries to follow suit and build their own c.a.p., so everyone would aim for autarkic self-sufficiency. His German counterpart Horst Seehofer is walking in the same direction. On the other hand this particular view was swiftly rebutted by Agriculture Commissioner Mariann Fischer Boel who took a pro-trade stance, just one month before her proposed overhaul of the CAP.
 
Of course agricultural ministers always resist change, but these interventions suggest that longer term moves to review the future of the c.a.p. will run into stiff opposition. We can probably kiss goodbye to any hope of completing the Doha Round before the US elections. Interestingly, Brazil is making tariffs on biofuels a key aspect of its position on Doha.
 
Pressure on the EU biofuels commitment continues to build. Commission President Barroso has asked for an assessment of the impact of biofuel production on food prices and on development. The Commission press room is thick with rumours of division in the college. Some officials are briefing that the 10 per cent commitment for biofuels in transport fuel by 2020 has been sidelined, while others dismiss any such talk.
 
Among member states the British appear to be reconsidering their biofuels commitment after a national 2.5 per cent obligation came into effect. Prime Minister Gordon Brown is concerned that some biofuels do not meet the necessary sustainability criteria and may call for changes in the EU targets.

The fact is that European and American subsidies for biofuels, which were designed to prime the pump until the industry could become viable in its own right, have produced a host of unpredictable and positively absurd consequences.
 
For instance, it seems that a big chunk of Europe’s biofuel industry has been put out of action because of the imports of “splash and dash” biodiesel from the US. All you need is a tanker load of biodiesel, maybe exported from the EU or South America, add 1 per cent of mineral oil, collect a subsidy of €200 per tonne from the US administration and then ship it back to Europe where you collect further subsidy. The EU companies have now lodged a formal anti-subsidy and anti-dumping complaint.
 
The debate over GMOs is going to hot up as well. It takes on a new urgency as world food prices continue to soar and is bound to provoke some intense debate in Commission, Council and in the member states. No doubt there are risks to be analysed and assessed, but I wonder how the arguments against the use of genetically modified crops could stand up in the face of a major world food crisis and massive malnutrition in developing countries.

I see that the corporate status of Volkswagen is in the spotlight again.  Last year the European Court ruled that limitations on voting rights in VW’s statutes infringed EU rules on freedom of capital movement, so the German government has now notified Brussels of proposed legislative changes to satisfy the Court judgment.

For Commissioner Charlie McCreevy these changes are not enough and letters have been exchanged.
 
It’s another of those battles where a member country wants to protect a national champion,  except that in this case the predator is also German: family-owned Porsche AG, which already holds 30.9 per cent of VW’s shares and is determined to push its holding above 50 per cent, which in most companies would mean a takeover. However, the VW law requires an 80 per cent vote in favour to adopt major decisions. That, I suppose, is the sticking point for the Commission.

The German government relinquished its own shareholding some years ago, but the Land of Lower Saxony still holds 20.3 per cent, and is thus able to block any takeover – and resist any moves to transfer the business away from Wolfsburg.
 
So what is Porsche’s interest? To bring all VW and Porsche models as it were into the same corporate garage, ensuring that VW remains German and, by the way, using the fuel-efficient Golfs to balance out the turbo-charged 911s when EU vehicle emission rules are tightened up under climate change legislation.

VW has survived attempts in the past to break up its voting structure, as when former Commissioner Frits Bolkenstein tried to push through a radical takeover directive and had to abandon his objectives in the face of widespread opposition. His successor McCreevy decided last year not to press ahead with one-share-one-vote legislation, but the VW case raises different issues of government control and the Commission is bound to pursue this one.
 
The Commission has another challenge on its plate, which is the bid by Austria’s OMV (30 per cent government owned) for Hungary’s MOL (independent quoted company). The Hungarian parliament last year adopted the so-called Lex MOL, a measure which would allow directors to block a bid for any utility company of national strategic importance.
 
This might seem a simple case of blocking capital movement within the EU, just like the VW case. Mr McCreevy is currently examining the legislation under this heading. But the closer you look, the more complex the issues become, enmeshed in the manoeuvring for control of energy markets across central and south-eastern Europe and the Balkans.

Heaven knows who is on whose side! Russia’s Gazprom was said to support OMV’s bid, and a Russian businessman bought a substantial slice of MOL stock on the Budapest stock exchange last summer which he then obligingly passed to OMV, yet OMV portrays itself as Gazprom’s competitor in the region and supporter of the Nabucco pipeline project, a gas transit route from central Asia through Turkey to Europe which would bypass Russia and offer an alternative to Gazprom’s South Stream pipeline.
 
Nabucco is a favourite project of the EU, as Commissioner Piebalgs has confirmed and is enthusiastically supported by the US, although ironically it would seem to depend on tapping Iranian gas supplies to become viable, which of course does not go down well with the Americans.
 
Needless to say, Russia is no enthusiast for Nabucco, but no doubt delighted that Hungarian prime minister Gyurcsany recently signed an agreement in Moscow supporting the South Stream pipeline – a move which cynics said was designed to boost his pension following defeat in the recent referendum in Hungary, rather in the style of a former German Chancellor who became a Gazprom executive.
 
OMV’s bid was notified to the European Commission under the Merger Regulation in January 2008. An in-depth investigation was announced in March, with a decision currently foreseen for July 22. Separating the economic from the geopolitical aspects of this case will be no easy task for the Commission’s competition team and you can be sure that colleagues from DGs for energy and external relations will have plenty to say.

It seems so different from the old days, when the Franco–German alliance was the central core of European integration. With new leaders come new perspectives. President Sarkozy used his March visit to London to woo the British, with a speech to the British Parliament where he paid unheard-of tributes to Britain’s qualities and set out a detailed agenda for Anglo-French co-operation.

The elegance of Mme Carla Sarkozy gave extra media colour to what was a highly successful state visit. If he wooed, she certainly wowed. The Entente Cordiale, signed in 1904 between Britain and France, has a new lease of life.
 
The President’s message was, to coin a phrase once much loved of some British politicians, that the UK should be at the heart of Europe, even implying that an Anglo-French partnership could be the new driver for the EU. One practical initiative is that ministers from the two countries will meet on a quarterly basis – presumably matching the bilateral sessions between Paris and Berlin. Thirteen French ministers accompanied the President to London.

Almost everything in the President’s agenda involved bilateral initiatives, but mostly set in an EU context. On the other hand there was little rhetoric from Gordon Brown which indicated any new enthusiasm for Europe.
 
Still, it’s a reflection of how EU priorities are changing, that even the most sceptical journalists were hard put to identify subjects of disagreement. Not even the common agricultural policy was much of a bone of contention (after all, we must learn to love the CAP in the face of soaring world prices!). Whether or not to boycott the Beijing Olympics opening ceremony seems about the only discordant item. No indication that energy liberalisation was discussed.
 
Especially interesting would be to know what was said behind the scenes about defence. Sarkozy has already indicated that France may wish to rejoin the integrated command structure of NATO, abandoned by De Gaulle in 1966, and will provide additional forces for Afghanistan, but nothing was said publicly about strengthening the European Security and Defence Policy and France’s wish for a stronger ESDP planning capability.
 
A stronger European identity in NATO may be France’s price for rejoining the alliance. This remains highly contentious for the US and probably for the British too.

On the other hand there was agreement on an Anglo-French maintenance contract for the A400M transport aircraft when this comes into service, leaving the Germans to their own devices, and reinforced arrangements for joint procurement and for pooling of helicopters, aircraft carriers and maritime aircraft in joint missions under EU or NATO auspices.
 
Certainly Sarkozy feels temperamentally closer to the UK than to Germany. There is no evidence of a close personal rapport with Angela Merkel of the sort which he seems to have with Gordon Brown and there have been specific problems, notably over vehicle emissions, over the independence of the ECB and over his idea for a Mediterranean Union (resolved in advance of the March EU summit – see Annex 1). Nor is Germany a natural partner on defence issues as Berlin faces politically painful challenges in putting German troops into combat zones.
     
In the end, though, the demands of realpolitik will determine alliances. The Franco-German understanding in not dead.

Talking of which, I note that Angela Merkel said that her CDU party agreed with Sarkozy’s UMP that Turkey should have a privileged partnership rather than full EU membership. This promises interesting enlargement negotiations when France takes over the EU presidency in July and certainly marks a fundamental difference with British policy. Another issue which failed to feature in the public pronouncements in London!

France and the UK both have relatively new leaders who could change Europe, but so do others. In Cyprus, for instance, there are signs of movement following the election of President Christofias, including demolishing barriers in Nicosia’s main shopping street. A symbol of hope, even though there’s a long way to go to unification.

I see that the new Polish Prime Minister Donald Tusk is threatening a referendum on the Lisbon Treaty unless President Kaczynski’s party supports ratification in Parliament. The party withdrew its support, demanding the same opt-out from the Charter of Fundamental Rights as secured by the UK.

It seems that June 12 has been set as the date for the Lisbon referendum in Ireland, the only country to hold such a vote (unless Tusk has to make good his threat). The Irish vote will not be a walkover  Sinn Fein will campaign for a no vote; Jean-Marie Le Pen has announced that he will also participate. It promises a fascinating contest where turnout will be crucial. A no vote would of course block ratification of the Treaty: back to the drawing board.