For most of the period in which Britain has been a member of the European Union, its political class has argued that, among the larger nations, this country is the only truly honest one. The Germans, it is said, need Europe to assuage their guilt, the Italians to compensate for poor government in Rome, the Spanish to consolidate a recent democracy and the French . . . ah, the French, trickiest of the lot, who regard Europe as La France writ large, a playground for the Enarque elites and a way of getting one over the Americans. National interest, the theory goes, prevails in all these countries; only the UK, in its bluff and honest way, admits it.
You can still hear British politicians saying things like that, but the argument has become harder to believe since the launch of the euro. That is not just because of the new currency’s successful launch, impressive as that has been. It is also because the launch has unleashed a whoosh of euro-enthusiasm in the member countries – especially in the two which still make up the motor of the enterprise, France and Germany. In this enthusiasm, one can detect the ambitions of political classes who do, indeed, have national interests to protect and advance – but who think they can do so by creating and strengthening the institutions of what is becoming a supranational power.
British hopes that the Social Democrats (SPD) under Gerhard Schroder (who sounded like a sceptic in opposition) would moderate Germany’s drive for more harmonisation have foundered. Oskar Lafontaine, the francophile finance minister, has won most of the first rounds of sparring with a chancellor who is much more dependent on him and the SPD than Tony Blair is on Gordon Brown or the Labour Party. In a joint article published in Le Monde last week, Lafontaine and Dominique Strauss-Kahn, his French opposite number, committed themselves to “assuming together [with the other euro member countries] the new responsibilities associated with an international currency” and claiming that “it is important, for economic dynamism and for social justice, to co- ordinate European fiscal policy”.
The German foreign minister and Green leader, Joschka Fischer, told the European Parliament last week that “political union must now be within our compass; it is the logical consequence of commercial and customs union”. Worst of all for the British, Fischer said flatly that his government “advocates limiting the need for unanimity in the EU in the longer term to questions of fundamental importance, such as treaty amendments”. New Labour has not been as fanatical about the retention of the veto as its Tory predecessors were – but it remains a vital element in its pitch that it will, ultimately, retain the right to “act in Britain’s interest”, especially in such contentious matters as the harmonisation of some tax rates.
What the British call French anti-Americanism plays a significant role in all this. In an interview two weeks ago, the French prime minister, Lionel Jospin, said that “we’re confronted with a new problem on the international scene. The US often behaves in a unilateral way and has difficulties in taking on the role to which it aspires, that of organiser of the international community.” The euro, he said, would allow Europe “to escape from the domination of the dollar”. His foreign minister, Hubert Vedrine, last week lamented the “absence of a counterweight” to the US, and proclaimed as one of his largest goals to “prepare politically, institutionally and mentally for the moment when Europe will have the courage to go further towards integration”.
It is only now becoming clear, after the euro’s introduction, how important exclusion from it is likely to be. That is because not just France and Germany but nearly all the other EU members – including Denmark, Greece and Sweden, now all in different ways indicating that they, or at least their elites, are anxious to join the euro – believe that this is an enterprise in which the demarcation lines between commercial, financial and political motives are vague to the point of non-existence. At a conference near Paris this week I heard the head of a large French company passionately interrupt a British sceptic, saying: “This is about the creation of a European state! It is not about mere commercial freedom!”
Some of the consequences of British exclusion have long been anticipated. Britain has more to lose than the three other euro “outs” because of the City of London, and because of its dependence – greater than in any other European state – on foreign direct investment. Frankfurt threatens the City, because it is home to the European Central Bank. If Germany and France succeed in getting a withholding tax on the interest earned from bank deposits and bonds in the EU, it would threaten London’s dominance of the eurobond market. And, if the jitters some Japanese companies have expressed about being marooned in offshore Europe are not calmed, a gathering may soon be observed on the Dover cliffs. The largest commercial development in the heart of Berlin is the Sony building, which will incorporate the headquarters of a Japanese company which is relatively unaffected by the turmoil at home because it has so shrewdly played the world market (its disastrous investment in Hollywood apart).
But all this can be managed, and may not be so bad. After all, even Frankfurt does not have the City’s sheer weight of financial institutions; Britain’s tax rates are lower; London is a more attractive city (in the main); and it is also much more of an entrepot between European and American markets, as well as being more plugged in to the rest of the globe.
What is less clear is how British ministers will cope with the euro-enthusiasm of their fellow social democrats on the Continent. There is one strategy, which has been most clearly associated with Peter Mandelson and may therefore suffer because of his exclusion from government. It is the insistence that the EU pay attention to its people; a theme of new Labourism taken to a European level.
Mandelson was the most committed “European” in the cabinet – and the one who had done the most creative thinking about its institutions. In a series of talks, mostly to private or semi-private occasions over the past year, he made clear that he thought the European Parliament was a bad institution, but impossible to remove. The need was to bridge the vast gulf between growing executive power in the EU and increasing public indifference. That could only be done, Mandelson argued, by tying the national parliaments much more closely to the workings of the Commission.
Mandelson believes that indifference to EU institutions is not confined to Britain. Even in the most euro-enthusiast countries, he argues, the elite is a long way ahead of the people – a distance which, sooner or later, will cause a crisis and perhaps a revolution.
When this point is put to French and German political or business leaders, they have two answers. First, they point out that they have always managed to get support in elections for pro-European positions, even if there have been doubts. Second, they say that the construction of a new order cannot proceed by constant poring over this or that opinion poll or focus group. The German politicians, who are less inclined to fall back on an implicit rationale that the business of leaders is to lead, have another belief which produces the same result: that Germany must remain anchored in Europe, and thus the stronger the European institutions are, the better.
Schroder has, of all modern German mainstream political leaders, done most to articulate something of a counter argument. He has made it clear, both before and after his election, that he no longer sees Germany as a country which must abase itself before its Nazi past, even if it must retain a responsibility for Nazi crimes. But if this was meant to imply a distance from European federalism, that line of thinking seems to have been submerged. Lafontaine is presently coequal in power to him. Fischer is the senior member of his coalition partner, the Greens. Schroder cannot go against his party, which is deeply wary of anything that looks like German nationalism. The SPD did, after all, oppose the reunification of West and East, and even voted heavily in the Bundestag against moving the parliament from Bonn to Berlin, with its imperialist and Nazi shadows.
So the popular mood – which is anyway shifting – does not cut too much ice with the powers that be in Europe. It is a pity, because Mandelson is not making – as some may suspect him of making, because he is a British politician – an anti-EU point. Indeed, he is making a point that has to be addressed. If it is not, anger at a Commission which has tolerated corruption, which cannot be overseen by an effective parliament and whose effective legislature (the Council of Ministers) meets in deep secrecy will boil over, and may be destructive.
The euro, then, may run into squalls; the enthusiasm presently so much a feature of the leading states in Europe may falter; the price of being out may fall. But we cannot count on it. Rather, we should count on bad news for the euro being bad news for sterling and the British economy as well.
The old question comes back to haunt this cabinet as others before it. How are we to make an accommodation with a Europe that wants “an ever closer union”? How are we to want it ourselves? Do we want it?
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