Year XXXVII, 1995, Number 3 - Page 143
Europe at the Crossroads
Europe is on the verge of taking vital decisions. The intergovernmental conference’s work on revising the Maastricht Treaty will start in the first half of 1996. If the treaty terms are respected, the transition to the third phase of monetary union will take place on 1st January 1999. These two issues can not be dealt with separately, unless the objective of institutional reform is to be thwarted by turning it, as some governments would like, into a mere smoke screen behind which the essentially intergovernmental nature of the current system will remain intact.
If, on the other hand, the Union’s institutional reform is conceived of along democratic and federal lines, the European currency must be an integral part of the process. In fact, the foundation of an embryonic European federation means creating decision-making mechanisms that are based on parliamentary control and that are free from the threat of veto. Yet it also means endowing these structures with at least a part of the competences which comprise the essential prerogatives of sovereignty. These competences consist of control over the purse and the sword, that is to say, control over the currency and the armed forces. It is no coincidence that only once previously during the European unification process have the governments been on the verge of a global reform of Europe’s institutions in a federal sense, and that was at the time of the EDC when the question of a European army was raised. Nowadays, while true that the intergovernmental conference may take some steps toward Europe’s defence in the framework of the reform of foreign and security policy, it is also true that no decisions in this area which could effect a real transferral of sovereignty are ready to be taken yet. In contrast, the European currency, which is necessary for the functioning of the single market and the stabilisation of the international monetary system, can be achieved in the short term, such that the date of its creation was set by the Maastricht Treaty as 1st January 1999.
On the other hand, a monetary union would be unable to function for more than a brief period without the democratic approval of the Union’s citizens. Moreover, this approval could only be expressed through certain federal-type European institutions. Besides, a single currency requires a common budgetary policy. This currency, whatever German finance minister Waigel’s opinion may be, must guarantee a minimum degree of financial re-balancing between the Union’s member states and can not be substituted by the permanent convergence of the budgetary policies of the national governments, which is guaranteed only by their goodwill and mechanisms of multilateral control. In any union of states there are always stronger and weaker economies and the imbalance between them inevitably tends to provoke the dissolution of the union itself, unless there is manifested within the framework of the union, and as a result of some common democratic institutions, an effective solidarity based on the awareness of a general interest of the union that is different from the particular interests of the individual states.
It is a fact that the interconnectedness of the targets of democratically reforming the Union’s institutions and of achieving the common currency does not mean that these goals must be achieved by a single decision. In fact, it is likely that their realisation will come about through a process. Yet it is important to keep firmly in mind that this will be a single process, and not two different ones, and that any progress in negotiations in the institutional sphere will be linked to progress in the currency sphere and vice versa.
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One fact is anyway certain: that the issue at stake in the decisions which will (or will not) be taken between 1996 and 1998 is sovereignty, even if initially limited only to the economic and monetary sphere. This means that these are the most difficult decisions that a group of governments could be asked to take and the respective parliaments to ratify. It would therefore be naive to think that the cornerstone decision of the process, the one that will start the third phase of monetary union, could be the painless and almost automatic result of the adjustment of the economic and financial policy of some of the Union’s governments to the convergence parameters established by the Maastricht Treaty. The creation of the European currency threatens important interests. It requires in the short term considerable sacrifices from special interests, albeit within the perspective of a much greater promotion of the general interest in the medium term. It must be added that the mechanism provided for by the Maastricht Treaty for achieving monetary union has a perverse aspect, since it establishes that the final decision must be preceded by a preparatory period, which has partly already passed, but whose most delicate phase has yet to begin. During this period, the uncertainty surrounding the decision will push the markets to bet, with increasing intensity the closer the final deadline becomes, against the Union’s weaker currencies with the risk that the many years of efforts by the various governments to bring their finances more in line with the convergence parameters will from one moment to the next be completely undone.
For this reason the outcome of the process will depend exclusively on whether a sufficient number of governments reveal a strong political will to create Europe. This does not mean questioning the huge importance that the commitment to achieving the convergence parameters will have. Since, under the Maastricht Treaty the governments have chosen the path of convergence, this path must be rigorously followed and the determination of the governments to achieve it must be considered in turn, during the stage of the process leading up to the final decision, as the only real gauge of the sincerity of their political commitment. Any attempt by one or more of the member states to weaken the Maastricht criteria or to delay the planned deadline for the creation of the single currency would have catastrophic consequences, because it would be interpreted by politicians and the markets as a signal of their intention to exit from the process or even to interrupt it. Yet this is not to deny that the effort demanded by the Maastricht Treaty is exceptional, and that the governments of the weaker countries can force it on themselves because it is an effort that is necessary to attain a precise and short-term objective. If this objective disappeared over the horizon, or even just grew more remote, the convergence of Europe’s economies could not be guaranteed by the purely voluntary policies of the national governments. On the contrary, precisely monetary union is the only way to ensure the irreversible convergence of the national economies, and denying this would mean to confuse the means with the ends. From this, it follows that when the moment to decide arrives, the creation of the European currency and the necessary institutions to run it will depend exclusively on the existence in some of the governments of the determination to bring the process to conclusion at all costs within the schedule set down in the treaty.
This determination will have initially to manifest itself inside the Union’s central core, the one which coincides with the group of founding countries (although Italy could be excluded at first, and Austria included). If this happens, it is likely that the other countries, or many of them, will rapidly enter the process, no matter what the procedures in order to do so will be. Hence, the problem is to determine whether this first core will develop the necessary political will.
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From this viewpoint, the only existing certainty concerns the firm will of Chancellor Kohl to achieve both the European currency and the democratic reform of the Union’s institutions without allowing opposing countries to stop the process by resorting to the unanimity rule. However, it can not be forgotten that however firmly rooted the popularity of this great European in his own country, German public opinion is frightened by the idea that through monetary union the German mark will be replaced by a European currency, which it is wrongly believed will be weaker, and that German citizens will be called on to remedy through their own sacrifices the profligacy of others. A not inconsiderable portion of the German political class tries to exploit these fears to electoral ends by asking not only the respect of, but the tightening up of the convergence criteria as a condition for the creation of the single currency, and by alluding to the prospect of delaying the start of the third phase if a sufficient number of countries can not meet these criteria within the allotted time. In fact these politicians desire neither the European currency nor the democratic reform of the Union’s institutions and use the tightening of the convergence criteria as a screen behind which to hide their real intentions. They represent a real threat to the Chancellor’s policy.
France’s position appears far weaker. The French economy absolutely requires the European currency and a majority of French government ministers supports it. Everybody knows that, should the prospect of the European currency become feebler, the French franc would be overwhelmed by speculative pressures. This awareness has pushed Chirac into abruptly altering the definition of his government’s priorities in order to privilege the goal of financial austerity rather than the objective of reducing unemployment. Yet, on the one hand, France has an excessive budget deficit and a very high unemployment rate; and on the other, the French political class is firmly bound to the idea of national sovereignty. Therefore, there still exist in France many and powerful political currents which would be prepared to postpone the creation of the common currency (that is, to ditch it) in order to make a more expansive budgetary policy possible, accepting meanwhile the consequences of devaluation; moreover, these currents oppose all plans for federal institutional reform in the name of defending national sovereignty. In reality many French politicians can not deny the need to democratise the Union’s institutions, yet they try to reconcile this need with the maintenance of national sovereignty by claiming that the way to democratise is through a strengthening of the Council (in as much as it is formed of ministers nominated in their respective countries according to democratic procedures) and by extending the control of the national parliaments over European decisions. However, in fact the Union’s democratic deficit lies precisely in the excessive power of the national institutions and in the inadequate, when not inexistent, control over European decisions by European citizens through their representatives assembled in the European Parliament.
Faced with these different positions, Italy could play a decisive role. It is close to France because its economy presents similar problems to France’s (although of much greater proportions in Italy, at least as far as its budget deficit is concerned). Its presence could therefore secure France from being isolated in a monetary union dominated by Germany. Moreover, contrary to France, Italy has well-established federal traditions which could induce its government to support Chancellor Kohl’s positions. Hence, Italy could tip the scales in the negotiations. Yet in order to do this, Italy needs to recuperate its lost credibility by endowing itself with a government that is based, at the European level, on the support of a broad alliance of forces and which demonstrates much greater vigour than the Dini government has so far done in its policy of restructuring the public accounts in order to satisfy the Maastricht criteria on schedule.
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The obstacles along the path to monetary union and the democratic reform of the Union’s institutions are therefore formidable and difficult to overcome. In addition, the time available is short. The challenges Europe must face will not wait. These challenges consist of the prospect of including the countries of eastern and southern Europe into the Union, which can not be postponed for more than a few years and which, without a radical strengthening of the Union itself, would transform it into a weak and ephemeral free-trade zone; the functioning of the single market, which requires a European currency and which has already been severely tested by the Italian lira, British pound and Spanish peseta devaluations; the rebirth of nationalisms, which in different ways are alive in all the Union’ s countries; the very survival of democratic institutions, which have already and everywhere been put in a state of crisis and which, above all in those countries where they are not based on deeply-rooted traditions, will not be able to survive for long in a political context where the lack of future prospects is increasingly impoverishing politics, transforming it into a sheer power game and causing it to lose sight of the objective of the common good.
The deadlines of the intergovernmental conference and of the beginning of monetary union’s third phase will, in the coming years, place Europe at the centre of debate in all the Union’s member states, and the forces which support unity are mobilising, albeit for the time being to a largely insufficient degree. If the opportunities provided by the intergovernmental conference and the date of 1st January 1999 should be missed, hope and mobilisation will give way to dejection and scepticism. The nationalistic forces would receive a huge boost. The process of European unification would be interrupted. The work of fifty years would be frustrated.
However, the battle remains open. The process of European unification started in the post-war period and has continued in the following decades because the national states were unable to guarantee on their own the essential conditions for their security and for peaceful and well-ordered civil co-habitation within their own borders. Today this situation has not changed, rather it has progressively worsened. The great and unsolved problems of peace, economic development and employment, and of environmental protection are real and threatening and make Europe even more necessary than before. Nevertheless, it is true that the idea of national sovereignty, in spite of having lost any positive function and any connection to the great political and social values, retains a great force of inertia, which has been accentuated since the end of the cold war and is now everywhere feeding the rebirth of nationalism. It is for this reason that creating a common currency, democratising the Union’s institutions, endowing its government with a suitable budget, and starting the process toward the creation of the structures of a common foreign and security policy are extremely difficult tasks. Yet what renders uncertain the outcome of this process is that this difficulty is matched by another, which is that of not deciding, of letting slip, after fifty years of integration have led Europe to the verge of unity, the deadlines of 1996-1999 without having brought closer to a solution any of the problems on which the future of Europe depends.
It can therefore be predicted that we are heading for a sharp confrontation between the forces which support unity and those which fuel division. This confrontation will initially be confused, but its terms will become gradually clearer as the debate develops and the contradictions become evident. Public opinion will inevitably be involved. The consequences of a failure of the European enterprise on the daily lives of its citizens will start to be understood. Moreover, already now the perception of the dangers Europe is running has started to spread and is bound continually to increase with the approach of the decisive deadlines. Here and there the embryonic awareness that division brings about the violation of the most elementary democratic rights of citizens is gaining ground. The paradox of Europe, such that where there is the power to decide there is no democracy and where there are democratic institutions the power to decide is lacking, will be felt to be increasingly intolerable. Hence, the task is to convert what today is an intense but unclear feeling of insecurity into a strong demand for Europe.
A phase has begun in which the contribution of a vanguard that is aware, united and determined will be able to have a decisive impact.
The Federalist
