With the crisis of the eurozone raging and no solution in sight Alan Thornett examines how the whole European project was driven from the outset by big business; how the contradictions which threaten to destroy the Eurozone today have been clear throughout; and how European integration and the single currency were opposed by mass strikes and popular mobilisations across Europe.
European integration – the history and the lessons
Early moves towards European integration were a product of the immediate post-war period. The European ruling class needed to stabilise its rule following the popular uprisings and radicalisations at the time of liberation, particularly in France and Italy. The answer was Marshall Aid which reflected the economic hegemony of the post-Yalta USA and the supremacy of the dollar as an international currency.
In 1951the European Coal and Steel Community was established. It had six member states: Belgium, France, Germany, Italy, Holland and Luxembourg. It was both a reorganisation of Western Europe against the East, and an attempt to enmesh a weakened West Germany into a European framework, which would hopefully avoid further European wars. A European Court of Justice was set up in 1953.
France strongly backed the Coal and Steel Community, but was opposed to NATO since it wanted to build a Europe independent of the USA. De Gaulle therefore refused to join NATO and France developed its own independent military capability, including nuclear weapons.
The Treaty of Rome and the EEC
In March 1957 the Treaty of Rome was signed, creating the European Economic Community (EEC) known as the Common Market. The Treaty extended the writ of the Community to agriculture and established a common customs union. Competition would be the basis of all economic and industrial activity and that all obstacles to it would be removed.
Britain applied to join the EEC in 1961, along with Denmark and Ireland, without a referendum or democratic mandate. De Gaulle opposed Britain’s application. He did not want what he saw as a potential American Trojan Horse as a member state. He was also concerned that divisions within the British ruling class over the EEC would disrupt the Franco/German alliance which dominated it.
In 1962 the controversial Common Agricultural Policy was established. Internal customs duties were abolished and a common external tariff was eventually introduced. The European Court of Justice was given jurisdiction internal to the member states.
The Common Agricultural Policy was, and continues to be, a mechanism for destroying agricultural production in third world countries by paying out huge subsidies to EU producers. These subsidies outstrip third world producers even when they are working on starvation wages.
In 1963 De Gaulle vetoed Britain’s membership of the EEC, and Britain was kept out at that stage. In any case Britain still looked to a world role and its so-called special relationship with the USA.
In 1965 the so-called Merger Treaty was signed, unifying the governing bodies of the EEC through the establishment of the Council of Ministers and the European Commission with executive powers.
The Council of Ministers became the supreme law making body of the EEC able to override the existing laws of the member states. It met in secret and consisted of a minister from each member state. The democratic deficit was being institutionalised.
Britain joins the EEC
By the early 1970s French thinking on British membership was changing. It was now increasingly seen as a potential counterweight to the growing strength of Germany. On the back of this the prime minister at the time, Edward Heath, was able to take Britain into the EEC in 1973, along with Denmark and Ireland, and without a democratic mandate.
In 1974 Edward Heath was replaced by Labour’s Harold Wilson. The official policy of the Labour Party was for withdrawal from the EEC so in 1975 Wilson called a referendum on Britain’s continuing membership – with a recommendation for acceptance.
Wilson won the vote to stay in against a No campaign supported by the whole of the left: most of the Labour left, the far left, and bulk of the trade unions, and led by Tony Benn, Michael Foot and Peter Shore. It was a major defeat for the left and the unions and was immediately followed by Wilson’s imposition of a pay policy.
In 1975 a directly elected European Parliament was established, with the first elections to take place in 1979. It would make little difference to the democratic deficit of the EEC, however, since executive powers would remain with the Council of Ministers and the European Commission.
The battles to regulate the currencies
In 1971the Bretton Woods system – which had maintained fixed currency exchange rates (against gold) in the post-war period – collapsed and a return to floating currencies took place.
This was a threat to EEC stability since the currencies of its member states were now fluctuating dangerously against each other in an increasingly unstable market. It was the start of a series of attempts to keep the European monetary system under control.
The first such attempt was in April 1972, with the creation of the so-called ‘snake’ under which participating countries agreed to limit the margin of fluctuation between their currencies to 2.25%. It was crisis-ridden from the start, however, and both Britain and Ireland were quickly forced out by the relentless rise of the Deutschmark.
The next attempt at stability was the European Monetary System (EMS) which replaced the snake in July 1978 after pressure from Germany and France. The EMS established a virtual currency in the form of the European Currency Union as the nominal EEC currency unit—based on an average of the various currencies weighted against GDP. It was regulated by the notorious Exchange Rate Mechanism (ERM) which set permitted fluctuations at 2.25%. Governments were obliged to intervene if their currency reached a warning threshold of 75% of the allowed deviation.
This was in effect the first real step towards a single European currency though not presented as such at the time. It also established the Deutschmark as the anchor currency of the EC.
In Britain the Thatcher government initially stayed out of the ERM but then joined in October 1990 with ultimately disastrous consequences. The pound was forced out in September 1992 (black Wednesday) after the Bank of England spent £18bn trying to maintain its value. Italy was thrown out soon after Britain while Spain and Portugal followed in 1995.
The scale of the problems created by locking the European currencies together, even within agreed margins of fluctuation, was becoming painfully clear.
The Single European Act
The Single European Act signed in 1986 was the next step in this direction. It strengthened the Commission, introduced qualified majority voting in the Council of Ministers and removed remaining obstacles to free trade. It was an important step towards a political rather than an economic project to meet the new conditions.
This situation was also shaped by changes in the economic conditions of the mid-1970s with the end of the post-war boom and the onset of more unstable and competitive economic conditions. European capital was thrown into increasing competition with Japan and the USA.
More and more the EEC was taking the shape of a rival power block designed to defend Europe’s economic power. The relatively small EU states required bigger and more stable markets and greater freedom for the movement of capital if they were going to compete.
The EEC also needed the ability to act politically in its own interests and to speak with one voice. This implied a centralised political leadership on the lines of that provided by the USA in North America and Japan in the Pacific Rim.
Thatcher signed the Single European Act because of the deregulation on offer. She soon regretted it, however, when the pace of integration accelerated and she has been attacked by the Tory right for it ever since.
Big business interests have been in the forefront of this agenda from the start. This took its most organised form in the establishment of the European Round Table of Industrialists in 1983 – initially by the chief executive of Volvo and seventeen other top industrialists. The companies represented have a joint turnover of £600 billion. Its aim was to improve the global competiveness of the EEC through further deregulation within Europe.
The route they favoured was the introduction of a single European currency, and rapid moves towards political union. The Round Table was therefore the driving force behind the next major development—the Maastricht Treaty.
The EEC was also getting bigger. Greece had joined in 1981, Portugal and Spain joined in 1986, and Sweden, Austria and Finland in 1995, building up to the 15 member states of today.
Maastricht: an instrument of neoliberalism
The Treaty of Maastricht signed in 1991 was designed to address both the needs of European capital in competing with North America and the Pacific Rim and the aftermath of the collapse of Stalinism.
The Berlin wall had come down, Germany was re-unified on a capitalist basis, the East European regimes had collapsed, as had the Soviet Union itself. What was posed was how to integrate the potential markets of the East European and ex-Soviet block countries into the EEC and into NATO.
Maastricht was also an attempt by the most powerful sectors of European capital to shift the balance of power even further in its favour and against the European working class in order to recover the rate of profit lost during the mid-1970s economic crisis. It was an instrument for the systematic introduction of the neoliberal agenda.
Under Maastricht the EEC changed its name, becoming the European Union (EU) in the biggest step yet toward a European super-state. A common European citizenship and a common EU passport were introduced and the Commission gained new powers—including provisions for the development of a common foreign and defence policy and the Social Chapter.
The most important measure of Maastricht, however, was the single European currency.
The prerequisite for establishing the single currency was the locking together of the exchange rates of the participating countries, potentially even more difficult than with the snake or the Exchange Rate Mechanism. The new currency would come in as a virtual currency on 1 January 1999 and would be on the streets as notes and coins a year later.
To administer the new currency the Maastricht Treaty established the European Central Bank (ECB). It alone was empowered to print notes and mint coins, and to set interest rates in the zone covered by the new currency; a measure which undermined the ability of the member states to conduct their own fiscal policy.
The ECB was required to maintain price stability. Its independence was guaranteed by the Statute of Autonomy, which made it completely unaccountable – more so than a national bank since it was more protected from popular political pressure.
The qualification for membership of the new currency was membership of the ERM and compliance with the convergence criteria. This set a limit of 3% of GDP on government deficit and imposed limits on inflation. The member states remained free to put up taxes, of course. In practice, however, they would cut public spending, particularly welfare.
It was a direct challenge to the post-war consensus on welfare provision and any remaining adherence to the notion of full employment. European employers have long regarded welfare as a millstone around their necks since North America and the Pacific Rim countries generally don’t have it. The Round Table have described welfare as “a time bomb threatening Europe’s competitiveness”.
After the introduction of the new currency the convergence criteria would change into the Growth and Stability Pact—as the regulator of currencies on an ongoing basis. The 3% of GDP limit on government deficit would remain, and any breach of it would attract fines of up to 5% of GDP.
Once the currencies of the EU were locked together economic fluctuations between the different member states would be reflected directly in rising unemployment and cuts rather than in changes in the relative value of currencies.
In a Europe of the single currency the free movement of Labour is necessary if depressed regions and countries are to be avoided. Economic, social and cultural barriers make it difficult for large numbers of people to move around to the degree which takes place for example in the USA. The large-scale movement of people is therefore not available as an economic regulator.
As soon as the Maastricht treaty came into force the race was on among the member states to qualify for membership of the single currency. Budgets were cut and austerity programmes introduced to get deficits below 3%. These attacks were mostly carried out by social democratic governments which were fully embracing the neoliberal agenda and were in power in an increasing number of EU countries.
The attacks dramatically increased the level of trade union and other forms of’ protest across Europe as the workers’ movement confronted this offensive.
There were important strikes in Italy in 1994 against austerity measures but what set the scene for the second half of the 1990s were the mass strikes and demonstrations against an austerity package brought in by the Juppé government which shook France at the end of 1995. Millions of workers took action in a strike wave which in many ways exceeded the great events of May/June 1968.
The Juppé government was brought down triggering the biggest wave of struggles across Europe for decades. During the following year of 1996 there were mass strikes in Italy, Portugal, Belgium, Greece and Spain.
The Amsterdam Treaty: implementing the single currency
The Amsterdam summit of June 1997 was held with this wave of militancy still continuing and a 50,000 strong demonstration was organised at the summit by the European Marches.
Despite this, however, the summit was successful from the point of view of European integration. Qualified majority voting was introduced into a number of new areas: customs, research, data protection, health policy, unemployment, equal opportunities and social policy. The primacy of EU law over national law was reinforced. The Schengen agreement (the basis of Fortress Europe) became a part of the basis of the EU. The role of Europol (an EU police force) was strengthened and further moves made towards a common foreign and security policy through the setting up of an embryo Foreign Office.
During the course of 1997 millions of workers were again involved in actions across the EU, mostly against the convergence criteria. Two million workers went on strike in Spain. In Greece 80,000 small farmers cut the country in half by blocking the roads with their tractors, demanding subsidies and tax concessions. Most of Italy came to a halt when millions took strike action in support of engineering workers demanding higher wages.
In Germany, 150,000 metal workers took part in the biggest workers’ demonstration since World War II, their strike forcing the Kohl Government to withdraw proposed cuts in welfare.
The single currency, however, was bruised but not beaten. By the middle of 1998 11 of the 15 EU countries had qualified (by a combination of austerity and creative accounting) to join the launch of the single currency on January 1st 1999. Greece qualified later making the number 12.
The above are edited extracts from a pamphlet by Alan Thornett published (by the ISG) in 2002 during a debate on the issue in the Socialist Alliance.