Orchestrating Europe (Text Only). Keith Middlemas
and was therefore a precondition for economic union (advocated especially by Italy and Belgium which most needed the external discipline); and on the other, the contention of the Bundesbank and Chicago monetarists, that convergence and completion of the internal market were themselves the preconditions.22
Within this grand argument lay others, such as the shape of stage two and Britain’s proposal for a ‘hard ecu’ rather than an irreversible single currency. (This proposal originated with Sir Michael Butler, and was taken up by Major when he was chancellor. Like Howe’s scheme in 1984 for a Single European Act without an IGC (see p), it had certain advantages, one of which was that it made a rigid schedule unnecessary. But, like Howe’s earlier scheme, it came too late. In any case, it would have implied a long delay in stage three. Though acceptable to Spain and possibly others, it ran into outspoken German opposition on the grounds that the ‘hard ecu’ would constitute a ‘thirteenth currency’.
Inevitably a compromise emerged, even in such a Manichean struggle: the timetable should be absolute, but so should be stage two’s move to narrow bands and the convergence criteria themselves, the assumption being that each member state would thus be forced to adjust its own inflation, budget deficits and public debt ratios. To meet British objections, the Maastricht Treaty’s EMU sections added that the Commission should monitor member states’ performance, as it was already doing in their progress towards the internal market.
Governments’ various alignments in the EMU IGC were composed by a sort of logic outside time and public opinion, far from the actual recession which was beginning to affect industrial players in the second half of 1991.23 Stage two was set to begin on 1 January 1994, stage three in January 1997 or up to two years later, a date from which John Major obtained his celebrated opt-out clause with Kohl’s direct assistance.
Only one event disturbed the tenor of compromise, when the Netherlands Presidency introduced a proposal that the four convergence principles should be achieved before making any move to set up an ECB. This was attacked both by the French and the Commission, with support from Italy and Greece, whose governments saw the external agency which was to help them reform their public finances evaporating. Yet this was what German ministers, primed by the Bundesbank, actually wanted. It also pleased the British whom at this stage the German government wished to carry with them. The ECB was not therefore to take its final form during stage two, but only a European Monetary Institute (EMI), whose precise relationship to the existing array of central banks was far from clear. Convergence seemed assured, and in fact developed most markedly at first among the more widely divergent members like Spain, Italy, Belgium and Britain. Commentators in the United States assumed parities already to have been fixed so that ‘hedge funds’, managed by men like George Soros, had a straight gamble on whether EC governments would hold to this resolve.
The denouement came quickly, as the Bundesbank pushed rates higher to cope with German domestic inflation in the second half of 1991. For the next year Pöhl’s successor, Helmut Schlesinger, pursued the lonely path of rectitude to maintain the bank’s reputation against manifestly political pressures from Bonn and other EC capitals, all of which watched the struggle between Frankfurt and Bonn with increasing dismay.24 Speculators inevitably targeted those currencies, the peseta and the lira, whose governments had most to lose from the deflationary regime and were most likely to have to devalue long before 1997.
Substantial issues affecting members’ sovereignty had been traded, as British, Dutch and Danish ministers constantly pointed out. Yet the pass had been sold with the Central Bankers’ Report. All the more scrutiny was therefore imposed on the political union IGC, at a particularly fractious time of quarrels over agriculture and GATT, and the siting of the EC’s new institutions such as the EMI. Meanwhile the Commission’s interventions brought accusations of overbearing behaviour: a proposal in May 1991 to make detailed regulations within existing laws earned the criticism that Delors sought to make it the ‘thirteenth state’. Delors himself, nearing the end of his second term, needed to keep in line not only the IGCs – the second of which was largely outside the Commission’s scope – but the future budget on which the promised cohesion funds (and thus the acquiescence above all of Spain) depended. Yet in the second IGC, the Commission had to be a broker between member states whose tolerance had already worn thin.
The first IGC did nevertheless settle the fundamental issue of where power would lie: in Michael Artis’s phrase, ‘it was the culmination of an unparalleled effort to think through the implications of monetary union and to strike realistic bargains in the interests of realizing this good.’25 Whether the Commission’s powers of enforcement, or the logic of convergence and the timescale, would be adequate to reach that point was another matter, when the ERM reached its foreseeable long crisis in 1992–3.26
II. Contingencies
REGIONS
Although the aim of creating ‘a more favourable business environment through the dehnition of a common industrial policy as a whole’, which was set out by the Commission in its paper on industrial policy in 1990, belongs to a distinct history, it affected the IGCs in a very broad sense, since it touched on key matters like trans-European networks for research and development, initiatives for training, liberalizing civil aviation or telecoms, the differing competences of the Directorates concerned with industry and member states, and the attempts to iron out economic and social imbalances in the Community. Since the imbalances, especially in the infrastructure, had a strong regional formation, a leading managerial and supervisory role had to be envisaged for the Commission. DG16 already had a claim to be the residuary legatee of such a role, by virtue of its responsibility for the Regional Fund.
But the more politically salient regions, above all certain West German Länder, led by Bavaria and North Rhine Westphalia, wanted a more tangible sign, outside the Commission’s competence. So great was their influence on Bonn, in the sensitive period before the East German Länder were assimilated, that an argument developed for instituting an entirely new political structure, one avidly welcomed by Spanish, Belgian and Italian regions. The Maastricht Treaty therefore embodied a new Committee of Regions, similar to the old Economic and Social Committee. At the time of signature, what this committee would become remained speculative (see chapter 9). But that it could be a useful sounding-board for the ambitions of different sorts of regions, ranging from German Länder to the partly autonomous Spanish regions was not in doubt. Hence the interest of trade union confederations, now once again linked under a regenerated central body, the ETUC, across the north-south divide in order to further the Treaty’s Social Charter.
SOCIAL CHARTER
The Charter’s roots can be traced back to the previous period of trade union influence nearly two decades earlier; more directly to the report from the Commission working group in 1979. It was also influenced by the high levels of tripartite consultation in the EFTA countries which were already requesting membership, such as Austria, displayed in the 1989 Kreisky Report. If, as the Commission forecast, these states were soon to enter the EC, then the Community’s labour market arrangements should be compatible with the conditions they already enjoyed. So argued the Netherlands, who were the leaders in this particular field. Delors and leading members of the ETUC such as Ernst Breit (DGB), Bruno Trentin (CGIL), and Nicolas Redondo of Spain’s UGT drew up the Social Charter, which was then adopted as part of the IGC agenda by eleven member states to one in December 1989. Its intention was to renew the earlier ‘social dialogue’ and compensate for the deleterious impact of the internal market and industrial restructuring, of which rising unemployment – forecast to reach 13% across the EC by 1992–3 – was the first consequence.
The Charter itself set out twelve categories of workers’ rights, based usually on the West German model of mitbestimmung, which were presumed to facilitate the emergence of a single European labour market, more flexible and endowed with higher skills.27 The Charter embodied the Vredeling directive under another, non-compulsory form, and was likely to arouse opposition from UNICE and the European Committee members of AmCham because of employers’ predictable fears about higher costs, restrictions on the rights