Orchestrating Europe (Text Only). Keith Middlemas
the most obvious result of Hannover was a renewed mood of optimism, and a determination to consolidate the entire project of monetary and political union. Cecchini had dealt largely with once-for-all benefits deriving from the original White Paper. But by 1989–90 it seemed that, if the single market did help to solve the underlying problems of the EC’s overall adjustment, the gains to be expected after 1993 would be vastly greater – at least for the northern European states – than he had predicted, not least because adjustment could provide means to counter US, Japanese and south-east Asian firms’ market penetration.
In that sense the achievement of an internal market, though the direct consequence of the Single European Act, cannot be isolated from the wider process which culminated at Maastricht in December 1991. For a relatively short period, member states accepted what had already become common sense in the business and financial communities, that the internal market’s likely gains offered greater advantage than earlier economic defensiveness. There could be no value in being the last to come in or the least conciliatory, since the game had ceased to be a zero sum matter; such defensive stances risked being overruled or gaining nothing, whereas the propensity to bargain represented an attractive alternative.
Yet member states’ ratification of the Single European Act hid a number of individual government reservations and, in the British case, perhaps also misconceptions about what had been accepted by the others and the Commission as logical corollaries. Hannover marked a point of political assent to the concept of a rule-based system in which sectional opting-out or evasion would become unprofitable, just as the pledge on EMU provided the necessary technical accompaniment (apart from Britain and Denmark) to avoid unmanageable distortions in the new market and the CAP. That in turn brought huge pressure on Britain and Spain to enter the ERM if they wished financial liberalization to reach its apogee.
The way the internal market was made cannot be isolated from the international context and the Gorbachev era of apparently ultimate détente, followed by the collapse of the Soviet empire in 1989–90, which opened up the countries of eastern Europe to new forms of exchange with the EC. West Germany’s leadership at Hannover prefigured its likely stance two years later as the Wall, and its accompanying psychological walls, came down.
Peter Sutherland, the Commissioner responsible for competition policy, had been appointed to lead the high-level Group on Operation of the internal market, in order to assess how best to achieve the full benefits Cecchini had promised. In his report, analysing post-1992 problems in managing the internal market, he pointed out that the Community’s main functions would now be to administer the rules, monitor member states’ compliance, improve their means of doing so, spread an understanding of the law to ensure consistency and transparency, and generally help to create a climate of shared responsibility in which the Commission would henceforward rely on member states’ competence and expertise, and on their courts for enforcement. The Single European Market was to become the core of a new EC geography which would in turn redefine the relative positions of Commission, member states and ultimately regions. But even in his chosen areas of goods and services, a great deal remained to do.
If this represented a new stage of partnership between them, it was clear from what Sutherland said that the Commission would have to accept some informal degree of diversity in practice among the Twelve, whatever its formal legal standpoint. The advance on the previous decade was nevertheless enormous, whether the Single European Act is depicted as the result of a tacit contract between all twelve member states or of a number of parallel decisions by each government about relative advantage. Either way, each player would respond to the rules, not because of the sanctions (which were negligible and had often enough been evaded in the past) but because of the severe and increasing costs of not doing so. Nevertheless, a number of substantive contingent questions remained to be settled, including the emphasis to be given to competition policy, and the Commission’s place in developing industrial and external trade policies, research and technology programmes. The Act nowhere stated that Article 115, which gave powers to take protective measures against non-European imports, would be removed; neither did it lay down details about progress towards monetary union – if it had, its passage would have been immeasurably harder.
Political problems also remained. When the British government argued for its own draft proposals for single market management before the Edinburgh Council in December 1992, several EC ministers contested the UK’s underlying philosophy, on the grounds that it reverted to the inter-governmental style and failed to acknowledge the Commission’s leading role.60 Representing France, Elizabeth Guigou also objected to the UK’s unwillingness to face up to the free movement of people, without imposing passport formalities. Yet on this obstacle to the Act they had already signed, the UK, Denmark and Ireland stood fast against the rest. Single market issues thus ran on, into and beyond Maastricht, to be affected by the recession of the early 1990s and member states’ increasing unease at the consequences of events in eastern and south-eastern Europe.
Taking the process from the early 1980s as a whole, it is clear that the closer the internal market came to fruition, the more it suited both member states and the Commission to cooperate and enjoy the heady mood of harmony after so many debilitating, stagnant years. In this sense, the mid–1980s represented a turning point. Afterwards the Community showed itself better able to face up to extended competition, to direct American and, later, Japanese investment (US investment had decreased during the recession of the early 1980s, as had European companies’ own investments in the EC). The majority of governments, in sharp contrast to their behaviour in the 1970s, also began to turn away from the defensive, non-tariff barriers which they had erected earlier on to delay harmonization.
Four deep modifications occurred in this period. The quality of EC governance improved, thanks very largely to better implementation and enforcement of the law; the financial sector became freely involved; competition policy was made congruent to the assault on intangible barriers to the internal market; and officials began to conceive of policies for industry, trade, social affairs and competition as a whole. In this sense, the internal market cut off both commercial players and their governments from the frustrating recent past.
The West German Presidency in the first half of 1988, and especially the Hannover Summit in June, appears in retrospect even more significant than it did at the time. Not only did that Presidency oversee the conclusion of many of the EC’s long-running battles, such as that over the abolition of exchange controls by France, Italy and Spain, but it witnessed what Arthur Cockfield called ‘the irreversible acceptance’ by member states of the single market. It also settled the budget saga for the succeeding four years, after one of the most prolonged and divisive crisis in the EC’s history, which had ramified into the CAP, now that France had become a net payer; and this, despite protests by the Länder governments and German farmers that Germany was already paying too much, and would pay more once ‘cohesion’ had been incorporated by the coming Inter-Governmental Conference (IGC).1
The Hannover Summit confirmed Delors’s second term of office from 1989–93, with British approval (Helmut Kohl having failed to put forward Martin Bangemann’s name, despite its being ‘Germany’s turn’, because of a political trade-off with the Free Democrats in Bonn). Delors would also chair the Central Bankers Committee which was to recommend rules for operating the future European Bank. Coming after a number of minor but irritating disputes over the CAP and the purity of beer, these achievements suggested that the Franco-German understanding had been enhanced. Insofar as there remained arguments, these were internal: the first being between Chancellor Kohl and Foreign Secretary Genscher about how to react to the Gorbachev reforms in Russia, and the second between the Bundesbank and the Bonn government over EMU.
But Hannover also demonstrated how consistently Germany (shortly to be reunited) would react when external events forced it to engage in the international domain. Whatever the different approaches to Ost- and Westpolitik advocated by Kohl and Genscher, Germany’s political elite was still