Back into Europe

The post-Maastricht EU has its priorities wrong. Monetary union is more likely to divide than unite. Timothy Garton Ash bets on it not going ahead and proposes that Britain should launch a "second project" based around enlargement to the east and closer defence co-operation
June 19, 1996

There is one thing on which British Euro-sceptics and British Euro-enthusiasts agree. It is the one thing on which both are probably wrong. This is the common assumption that France and Germany are going ahead with plans for closer European integration, built around monetary union, to make a European union which deserves the name.

Euro-sceptics equate "federal" Europe with a Brussels superstate. Euro-enthusiasts are divided between those who still wear the old federal badge with pride and those who fight shy of it, both for tactical reasons and because the word "federal" means different things in different European languages. Yet both sides agree that the choice for Britain is essentially whether to join in this continental project or not. Enthusiasts say we should. Sceptics say we shouldn't, and canvass alternative futures: free trading transatlantic bridge, offshore Greater Switzerland or whatever. Both sides join again, however, in deriding the Major government's contention that Britain is "at the heart of Europe," successfully developing the shape and direction of the EU.

There are powerful reasons for this common assumption and that shared derision. It is true that Chancellor Helmut Kohl and a large part of Germany's political elite are still committed to taking a decisive step towards integrating newly united Germany into a united Europe: through monetary union to political union. It is true that a large majority of France's extraordinary ruling class-products of the grandes ?coles circulating around the commanding heights of politics and business-has an even deeper investment in the project of regaining more control over their currency and binding Germany to France, through Emu. This is a project which they have pursued for many years with great skill and singleness of purpose, and at considerable cost.

It is also true that the leaders of France and Germany are utterly fed up with British carping and cussedness. Mad cows have provided not just the latest cross-channel quarrel but also a new metaphor for this continental view of Britain. French and German leaders find togetherness in ironical remarks about Anglo-Saxon attitudes: "We welcome our American and British friends after their long flight to Europe," and so on. In Germany, irony has turned to sarcasm tinged with real anger. What has happened over the last five years has been one disappointment too many. All right, Britain stood aside in the 1950s. All right, Britain spent years renegotiating the terms of its membership after it finally came in. All right, Margaret Thatcher was-well, Margaret Thatcher. But five years ago there was a real hope that the Major government would open a new era of British pragmatic Europeanism. Instead of which...

So the notion that continental leaders are listening with bated breath to London's new ideas about Europe is pie in the sky. If anything, good ideas are discredited by the fact that they come from here. To be sure, hopes are attached to a change of government at the next election; but these hopes are of things becoming a little less difficult with Labour, rather than of any new dawn.

None the less, on a sober analysis of what is actually happening in Europe-rather than what European leaders piously pretend is happening, let alone the fantasy world of what British politicians say is happening-it looks increasingly questionable whether the EU will in fact develop according to the Franco-German plan. Some of these questions are familiar, but it is worth summarising them briefly.

first, there is the centrepiece of that plan: monetary union. It is a real question whether both France and Germany will meet the Maastricht criteria in 1997. If they do not, the criteria will have to be fudged or the implementation of Emu postponed. One way or another, postponement might mean abandonment. It would mean a loss of momentum, perhaps including the retirement of Chancellor Kohl, and a danger of renewed speculation against the franc (hence the discussion of an alternative coup de th??tre consisting in an overnight, permanent fixing of the franc-Deutschmark exchange rate).

Fudging the criteria would be favoured by much of the French elite, and the Maastricht treaty has sufficient weasel wording for the lawyers to make this respectable. The criteria will have to be fudged in any case for Belgium's public debt-if the Benelux countries are to be present at the creation. But then other member states will say: if you can fudge it for them why not for us? What's fudge for the madeleine should be fudge for the amaretto. Moreover, there is a question whether even Kohl could sell a fudging of the criteria to his own people, deeply worried as they are about giving up the Deutschmark.

Both France and Germany have parliamentary elections in 1998. The French referendum debate after Maastricht showed that the French elites can no longer rely on a permissive consensus for building Europe from above. The protests and strikes of late last year showed just how difficult cutting back the welfare spending of the Fifth Republic will be. High unemployment can be blamed (rightly or wrongly) on the monetary union project. There is no clear majority for the single European currency, and recent polls indicate that-as with Maastricht-the less educated and wealthy the respondents, the more likely they are to be against it. There may be broad agreement on the need peacefully to contain Germany, but with monetary union the question is who is containing whom. Moreover, President Jacques Chirac is not so committed to the project as Fran?ois Mitterrand was, and he has both an alternative premier and an alternative policy in Philippe S?guin.

In Germany, the opposition to monetary union is less clearly articulated in the political arena, but actually both wider and deeper. In opinion polls, there is a clear majority against giving up the Deutschmark. The popular press stokes popular worries about the Euro ("Esperanto Money"). The Deutschmark is the symbol of postwar German achievement. True, some German businessmen see Emu as the remedy for the overvaluation of the Deutschmark, which has worsened the country's crisis of competitiveness. But the business and banking community is divided on this issue, and most ordinary Germans would rather have their savings in a strong Deutschmark than in a weaker Euro.

The two most respected institutions in German public life, the constitutional court and the Bundesbank, which are to Germany what, say, the monarchy and the Church of England were to Britain 30 years ago, have both expressed reservations. The constitutional court has made German accession to monetary union dependent on a vote of the German parliament-a highly creative interpretation of the Maastricht treaty. The Bundesbank has been playing the most splendid series of variations on the theme of "yes, but..." Far from countenancing a fudging of the criteria, they are discussing sanctions against members of the monetary union which violate the criteria after monetary union.

Until recently, the taboo-based consensus in favour of Emu held across the mainstream German parties, with only the Bavarian CSU conservatives picking at it from the margins. (The taboo can be summarised as an equation: against Emu=against "Europe"=nationalist=Nazi.) But in the regional elections in Baden-W?rttemberg earlier this year, a leading Social Democrat, Dieter Sp?ri, dared to campaign on opposition to Emu. True, the Social Democrats fared quite badly with this (as Michael Mertes pointed out in the last issue of Prospect). Yet this does show that the taboo is breaking down. If the prospect of giving up the Deutschmark really becomes imminent in 1998, I would not exclude the possibility of a Social Democratic opposition to Kohl saying: "For Europe, but against monetary union."

Deeper still, there is the fact that the cold war is over, Germany is again united and as sovereign as France or Britain. It does not need the support of its western partners in the way it did prior to unification. Nor, more than 50 years after the end of the war, does it feel such an acute need to prove its European credentials. For Germany, the question "why do we need Europe?" has to be posed and answered anew. There are answers, good ones, but the Europe they point to may not be that designed at Maastricht.

None the less, the received wisdom among the elites of western Europe seems to be that monetary union will still go ahead between France, Germany, the Benelux and a few other countries (Finland? Austria?). My own wholly unscientific hunch is that this elite wisdom is wrong. France and Germany, I think, will probably make it to the church door, but not to the altar. I even have a bet on this (?50) with a leading Tory Euro-sceptic.

Yet even if I lose my bet, this does not mean the Franco-German plan has succeeded. If a core monetary union goes ahead, all the pertinent questions raised in London about the relationship between "ins" and "outs" become acute. They have not yet been answered. French and German manufacturers already complain about competition from Italian and British exporters, pricing their goods in devalued lire and pounds. These problems would intensify following the introduction of a core monetary union. I would take another bet that the response of the core countries would be protectionist. If the distinction between monetary core and periphery remained for long, it could be the beginning of the end of the single market. What is supposed to unite would in fact divide.

The core group, moreover, would clearly need close co-ordination of fiscal and macroeconomic policies. Would this be outside the current EU structures? Or would they constitute a permanent caucus inside the relevant EU councils of ministers? How long could the EU survive such an internal divide? So far, the proponents have answered these questions by retreat into euphemism and advance into metaphor. From the tactless "hard core" we have retreated through the art-historical simile of a Franco-German "avant-garde" to the deliberately innocuous-sounding "enhanced solidarity." But the real claim is contained in a metaphor. This core, it is argued, will be a magnetic core. The internal division will be only temporary because the other states-crucially, Britain-will soon be drawn in. Where Germany and France lead, the rest will follow. Why should that be so? Because it has been so throughout the history of European integration since the 1950s.

But this is a great gamble. It pits the experience of the last 40 years in the European state system against those of the previous 300, during which the formation of an alliance of the main European states sooner or later provoked the formation of an opposing alliance. It ignores the extent to which the progress of European integration was facilitated by the peculiar conditions of the cold war: with the Soviet Union as negative external integrator, the US as positive external integrator, and the untidier half of Europe conveniently cut off by the iron curtain. Moreover, building a core union around a core monetary union in itself offers nothing to that other half of Europe now knocking at our door. It does not, in itself, do anything to prepare the EU for enlargement, or equip it to deal with the challenges of war, nationalism and instability in the post-communist and Islamic worlds of east and south. Another Bosnia, in Algeria for example, or Bosnia itself when the Americans go, seems likely to find us little better prepared.

how should britain position itself? The problem here is that the British punter is at the same time an important horse in the race. However much Britain has consigned itself to the margins of Europe, whether Britain joins Emu will substantially affect the chances of it succeeding or failing. With Bri- tain in, the balance between "ins" and "outs" would shift significantly. If just northern Italy could be added-which, of course, it could not be, whatever Umberto Bossi's Northern League would wish-then the whole of what geographers nicely term the "golden banana" of west European advanced economic development, stretching from Manchester to Milan via the low countries, eastern France and western Germany, would be inside. There would still be a problem of "ins" and "outs," but the weight of the periphery would be less and the magnetism of the core greater. So a good part of the remedy to the problem that Britain was the first to identify may lie with Britain itself.

Yet it would be foolish to assume that, for this reason, France and Germany will wait for us, or adapt the project substantially to make it more congenial. They have their work cut out adapting themselves to it, and it to themselves. If France and Germany did decide in 1998 to go ahead in 1999, or, say, a year later, what should the new British government do? The trouble here is that, allowing for a little local exaggeration, the Euro-sceptics are broadly right about the likely costs of going in, and the Euro-enthusiasts are right about the costs of staying out.

To go into this Franco-German/Emu core Europe would have major costs. It would mean adapting to aspects of a Rhenish economic model which may not be the best one for Britain or Europe in the 21st century. (Many German bankers and businessmen argue that what Germany needs is more of the Anglo-American model.) It would mean sacrificing some of our competitive advantage based on cheap labour and flexibility. It would mean a major sharing of sovereignty, through the necessary co-ordination of monetary, fiscal and macro policy, let alone the likely political integration to follow. Here, too, because our history and constitution are so different, we would have to adapt more than others. Moreover, the Maastricht/Emu agenda furnishes no answers to the largest challenges that face us all after the end of the cold war in Europe.

But staying out would have huge costs, too. There is a strange piece of double-think in the Euro-sceptic argument. Emu appears as a conspiracy of socialist protectionist continentals-"a German racket to take over Europe" in Nicholas Ridley's famous phrase. But then we are suddenly asked to believe that, if we stayed out, these same nefarious continentals would sweetly allow us to continue having full access to a single market in which we could then merrily exploit to the full our competitive advantages. As a piece of wishful thinking this belongs in the Guinness Book of Records. No, the Euro-enthusiasts are right about the costs of staying out. We would become disadvantaged in the market which takes more than half our exports. We would lose inward investment. The City would suffer. The temptation would increase for governments to go back to the bad old ways of inflation and devaluation. Being seen as marginal to mainstream European developments, Britain would also lose influence elsewhere in the world. To be sure, there is an exaggerated post-imperial British obsession with our "role." But this loss of influence, especially with the US, would matter because it would reduce our ability to protect our own interests.

So we're damned if we do and damned if we don't. If it comes to the crunch, going in would seem to me the lesser evil. But the least bad option for Britain would be for the project of Emu itself to be quietly dropped. I would argue that this would, in fact, be the best thing for the whole of Europe, too. Emu is yesterday's answer to yesterday's problem. But with our opt-out, and the British record of the last 40 years, it is currently very difficult to argue that case with an English accent and convince anyone on the continent that one has European interests at heart.

Moreover, the dangers of abandonment are also great. There has been a huge political and emotional investment in monetary union among the French and German elites. Rhetorically, even intellectually, they have linked the whole future of Europe to it. If it fails, how much else would fall with it? Much would, of course, depend on precisely when and how it failed. The least bad variant might actually be for the international currency markets to take it apart. Then European leaders could join together in denouncing invidious American currency speculators. But I rather doubt whether George Soros is ready for this sacrificial role. In any case, some of the blame would surely be given to Britain, even if we had merely stood silently on the sidelines.

What direction would France and Germany take thereafter? The most likely answers are indicated by a person in France and a place in Germany. The person is Philippe S?guin; the place is Berlin. S?guin already represents the Gaullist alternative to which President Chirac, in one of his many previous incarnations, has himself been drawn. In Berlin, to which the Bonn government is to move before the end of the century, Germany is rebuilding itself the grand capital of an historic nation state, right at the eastern frontier of the present EU. Imagine, then, a post-Kohl German government in this Berlin, faced with the failure of Emu, a more Gaullist France and an isolationist Britain. How would it, how could it, react but by more definitely pursuing its own national interests in the centre of Europe?

I could write the speech now: "We Germans were ready, at the moment of our own unification, to share our most precious asset, the Deutschmark, and bring united Germany into a united Europe. But others were not prepared to take up this historic offer. So now, faced with the challenges of instability just a few minutes' flying-time to our east..." And so on. Russia is not at the moment a credible partner for a special relationship with Germany, and the new Germany has been very careful to soothe fears of a "new Rapallo." But if the European framework were to get weaker and Russia to get stronger, the Berlin republic would face strong pressures, both external and internal, to formulate a national policy towards the east. This would by no means necessarily be a Russian alliance, it might also be an attempt to make an anti-Russian alliance in a new Mitteleuropa. Either way, the likelihood would increase of very different national reactions to crises in the east-for example, to Russia bullying Ukraine or the Baltic states. The differences between Germany, France and Britain over policy towards former Yugoslavia are a foretaste of what might happen.

Helmut Kohl implicitly makes an even darker prognosis when he links monetary union to the prospects for war or peace in Europe in the next century. Like his hero Konrad Adenauer, he worries that Germany cannot be trusted to keep its own balance in the centre of Europe. But the fear comes over almost as a threat: if you don't join me, my successors will start beating you! This fear is probably exaggerated: the leaders of bourgeois democratic Germany and France, committed to many structures of international co-operation, are not suddenly going to turn the clock back to before 1914. But it is likely that both would be harder-nosed in the pursuit of national interests.

This Europe, then, would be closer to the Europe of nation states which Euro-sceptics want, a Gaullist Europe des patries. But the question is whether British interests would be easier or more difficult to pursue in such a Europe. One could make a strong case that they would be more difficult to pursue. The closer you get to old fashioned power politics, the more the classic assets of old fashioned power matter. And who has more of them? In other words, Britain might actually find itself doing worse in a Europe in which Germany and France started behaving like Britain than in a Europe in which Britain and France have to behave a little more like Germany.

If this suspicion is right, then our position is difficult indeed. Starting with the Franco-German project of Emu, we reach the conclusion not only that we are damned if we do (join in) and damned if we don't, but also that we are damned if they do (go ahead) and damned if they don't. Alas, poor Albion.

i have deliberately overstated the case. But the British corner is a tight one. How to get out of it? Perhaps we can't, and we certainly won't overnight. However, here is a modest suggestion as to how to try. We reserve our position on Emu, with reference both to our Maastricht opt-out and to the referendum which obviously should be held on this issue. Meanwhile, instead of insisting on our particular national interests, we unfold what could be called a "second project" for the EU. This second project is complementary to Emu, reaching the parts Emu does not reach. But it is also potentially an alternative, in the event that Emu fails. The two main points of this second project are preparations for the eastward enlargement of the EU and improved co-ordination of foreign and defence policies.

Why are these in the British interest? After all, we are an island far away from post-communist central Europe, let alone from those parts of eastern and southeastern Europe which have already sunk into disorder and war. Unlike Austria or Germany, our people are not regularly faced with large numbers of east European immigrants or refugees. For most of the great British public these are still "far away countries of which we know nothing."

Well, exactly. Neville Chamberlain's famous phrase says it all. The lesson of the first half of this century is precisely that Britain cannot long remain unaffected by developments in the parts of Europe where two world wars started. If this was true of imperial Britain, it is even more true of today's Britain, which is so much more heavily interconnected with continental Europe, through trade, the EU, Nato and so on. Central and eastern Europe is an area of vital interest to Germany, and Germany is of vital interest to us. Beyond it lies an increasingly truculent and revanchist Russia: a Russian Weimar republic, but with nuclear weapons. Defence and foreign policy are probably our strongest national suits. Not to be involved in these areas would be to opt for a radically different way of understanding what Britain is-the Greater Switzerland model-which I believe would also be unsustainable.

Moreover, the very fact that these are not obviously direct British interests, but wider European ones, makes the agenda more rather than less attractive. Here, we can convince continental partners that we are developing an agenda for Europe, and not just for British interests narrowly conceived. We can point out, with good reason, that the whole future of the European project cannot be allowed to stand or fall with the great gamble of monetary union.

Malcolm Rifkind's Foreign Office will say: but this is precisely what we are doing already! Because of Conservative divisions on Europe, however, the message comes through not loud and clear but hopelessly hedged about with reservations, and even the hedges are hidden behind the smoke and gunshot of the Conservatives' battle of Europe. One raucous speech by Michael Portillo at a Conservative party conference undoes a dozen quiet constructive ones. Furthermore, in Paris, Bonn, Brussels and most other continental capitals, British advocacy of enlargement is immediately suspected of being a neo-Thatcherite manoeuvre to dilute the EU and return it to the old British dream of a free trade zone plus loose intergovernmental co-operation. This suspicion is hard to disarm, since that is indeed what some Conservative advocates of enlargement would like.

A new Labour government would have a better chance of putting the case credibly. Even if their substantive proposals were not so different from those being made already, the accompanying music would be different and they would be viewed differently abroad. Yet it remains to be seen how strong are the forces of Euro-scepticism in Labour's own ranks. And while there is clearly an unspoken agreement not to conclude the intergovernmental conference until after the British elections, many of the main decisions will be far advanced, with deals already struck between other member states.

Could we, if we started now, find allies for this second project? Definitely yes, above all in Germany, where there is an even firmer elite consensus on the necessities of eastward enlargement and of more European defence and security co-operation than there is on Emu. In France, too, for the defence and foreign policy part. Of course France wants to change Nato before coming back fully into it, and to have a more distinctly European defence identity, but in just the last year there has been remarkable progress in Anglo-French defence co-operation.

The most difficult part is French reluctance over enlargement. Not so long ago I heard a senior French businessman pithily summarise his attitude to enlargement thus: "il faut toujours en parler et jamais y penser." He is not alone. But look at it like this: would you rather be in there with Germany trying to persuade France on enlargement, or out here on monetary union, with France and Germany having almost given up on trying to persuade you?

Neither of these two undertakings-enlargement and foreign and defence policy-fits neatly into the classic federal/non-federal or integrationist/intergovernmental dichotomy. The British government is right to argue that you cannot apply the methods developed for commercial policy to foreign policy and defence. Here it does make more sense to think of "coalitions of the willing" or qualified minority acting rather than qualified majority voting. But the question remains how exactly that works: in what ways the majority of member states would legitimate, support or restrain the able and willing minority?

Enlargement is even more complicated. For even the most advanced countries of east central Europe to come into the Common Agricultural Policy (CAP) and structural funds, as presently constituted, would drastically increase the community budget. This prospect is a useful goad to reform of the CAP and structural funds. Yet it is very hard to see Poland or the Czech Republic stepping into all the current rights and obligations of membership at a stroke of the pen. When they joined the EC, Portugal, Spain and Greece had economic transition periods (which for some goods lasted up to this year). For post-communist countries those transition periods are likely to cover more areas and last longer. They might, for example, include only partial membership of the CAP, and initial restrictions on the free movement of labour. The question then becomes: if they are not joining the full, classic commercial-legal acquis communautaire, what are they joining? What is the minimum essential content of EU membership?

My answer is: a solemn and binding commitment to abide by the rules and procedures of political, negotiated conflict resolution between nation states, which is at the heart of what the EU has achieved. Not the common market, the common institutions or even the common laws as such, but the habits of permanent, institutionalised co-operation are the essence of this "Europe": making jaw-jaw instead of war-war, in Churchill's phrase. In western Europe war-war now seems a very remote possibility, but in eastern Europe it is a real danger, and in former Yugoslavia and the former Soviet Union it has already become a reality. To say that the EU has "kept the peace in Europe" is far too large a claim, both because the peace has not been kept all over the continent and because, so far as it has been kept, Nato and the nuclear stand off between the superpowers were a larger part of the explanation. But the habits and institutions of peaceful conflict resolution between nation states in the EU, those endless councils of ministers, have helped. With all its faults, the EU remains the closest we have come to a non-hegemonic order in Europe, and this is something worth preserving and extending to those parts of Europe threatened by disorder and war.

In order to make an EU of 20 and more member states work, however, we patently need streamlined institutions and more qualified majority voting in the councils of ministers on some areas of EU competence. If we in Britain are not prepared to countenance the relatively modest further sharing of sovereignty that would entail, there is no point in advancing this project at all.

Here's the rub. In 1954, after the failure to create a European Defence Community, Britain was at hand with an alternative plan for the security of Europe. In offering it, we were prepared to break an important, national taboo. For centuries, this country had refused to commit itself to have a standing army on the continent. Now it did so. As Emu falters, are we prepared again to offer a constructive alternative? Or shall we remain imprisoned in our taboos?

I wish I could give a more hopeful answer. It seems that our problem is the opposite of that faced by France and Germany. Both countries have political elites that have consistently pursued strategic European policies, designed to secure their own countries' future positions in Europe and the world. The trouble is that their own peoples are increasingly reluctant to follow the politicians. Our problem, by contrast, is not that the British people are declining to follow where our political leaders wish the country to go. Our problem is that we have a political elite which seems incapable of producing that kind of strategic leadership in the first place. Perhaps this will change with a new Labour government-but that is something I would not bet on.