Europe on the Brink: Democratic Values and the Single Currency
Mini Teaser: The EU is not democratic. Neither the EC, nor the Council of Ministers, nor the European Central Bank is democratically accountable; and they cannot be made so, because Europe is not a nation.
The process of European political integration is moving at speed,
cheered on by the United States. Europe, the argument goes, has been
the place where the wars start, wars into which America is ultimately
dragged, and European political union will put an end to such
conflicts. And as far as U.S. foreign policy is concerned, things
will be a good deal easier once there is a common European foreign
and security policy, providing, as it were, the State Department with
a single number to call in Europe.
Those assumptions need to be questioned. The single currency, due to
commence next year, is a leap in the dark. Never has a group of
sovereign nations attempted such a pooling before. Never have
democracies been willing to invest so much power over the lives of
their citizens in a body--in this case the European Central
Bank--which is not democratically accountable. The tussle is on
between the German bankers, who want to ensure that the currency will
hold its value as reliably as their beloved Mark has done, and the
rest, who fear for the impact of such austerity on their rates of
unemployment.
We do not yet know whether the euro will be soft and inflationary, or
hard and recessionary. In either event, chaos and recrimination in
Europe are not in the U.S. interest. As I shall argue in this essay,
those who believe that political union is the key to avoiding
conflict have got it wrong. Rather, future danger lies precisely in
forcing nation-states into an artificial political union that will
transfer policy-making from the individual states, which are
democratic, to the European Union, which in itself is not. The
traditional danger in Europe has come from extremist nationalism.
Political union seems likely to rekindle it, as national interests
are ignored by policymakers who areĆ both remote and irremovable.
There is more to a common European foreign policy than an easier life
for State Department switchboard operators. At the time of writing,
the United Kingdom is once again giving its willing support to the
United States in its policy toward Iraq. Time and again, the United
States and Britain have made common cause in the defense of liberty.
There are few if any other nations who support America so dependably,
and Britain's diplomatic backing is, I believe, an important asset
for Washington.
If political union extends to the creation of a common European
foreign and security policy, arrived at by qualified majority voting
amongst the member states, the United States will stand to lose that
backing. As recent history demonstrates, it is inconceivable that a
common European policy would normally back America, or be generally
robust. Indeed, the motivation of some of those now striving to
create political union in Europe is to establish a new bloc with a
distinctive policy outlook that will be at best un-American, and
quite possibly anti-American.
I suggest that it is time for Americans to take a more careful look
at what is happening in Europe and, before cheering political union
to the finishing line, to re-assess very carefully where their
country's real interests lie.
I intend to discuss the issue of the European single currency not as
it is often talked of in Britain, as though it were merely an
economic device which can be measured simply in terms of material
costs and benefits. I wish to examine it rather in the terms
regularly used by Britain's European partners. They see it frankly as
a project reshaping the way our continent is governed, to create a
political union that can free Europe from the fear of conflict
between its nations.
On the face of it, this may strike many as an excellent idea. In the
last two centuries the peoples of Europe have paid a terrible price
in wars. The Napoleonic Wars ravaged Europe for the best part of two
decades. In World War I, fifteen million were killed, mainly
soldiers. In World War II, the toll was at least forty-one million,
of whom most were civilians. There is no higher or more important
objective for politicians in Europe than to work for policies that
may better guarantee the security of our continent and avoid a
repetition of the dreadful slaughter of our modern history.
We can distinguish two causes at the root of these past European
conflicts. The first was Franco-German rivalry. Prussia and Austria
invaded France in 1793 and 1813. France occupied Prussian and
Austrian territory between 1805 and 1813. Prussia dealt the French
army a swift defeat in 1870, and went on to besiege the French
capital, causing many Parisians to die of starvation. Germany invaded
France in the opening stages of both world wars. Understandably
therefore, since the Second World War much effort has been devoted to
creating political institutions, and other links, to bind the former
adversaries together.
A second cause of past conflict was the so-called Eastern Question in
its various forms. There was the clash, both ideological and
territorial, between the empires of Christendom and the Islamic
empire of the Ottomans. The assassination in Sarajevo of an Austrian
archduke, and Austria's revenge for it on Serbia, provided the spark
for the outbreak of the Great War in 1914. But Germany's suspicion
and fear of Russia, another part of the wider Eastern Question, were
a more fundamental cause of that war. The mutual aggression between
totalitarian regimes in Germany and Russia supplied the bitterest and
most costly conflict of the Second World War. In contrast to what has
been done in the Franco-German case, comparatively little effort has
been devoted to bringing Russia fully into the family of Western
nations, or to building bridges between Christendom and Islam in
Europe, a matter I shall return to later. First, let us look at how
efforts to resolve the rivalry between France and Germany have been
taken forward.
The Idea of a United Europe
The ideal of creating a united Europe, even a United States of
Europe, arose as part of the humanist-pacifist tradition long before
the wars of the twentieth century, but until the end of the Second
World War it was largely confined to academics and dreamers.
Thereafter, it was taken up by statesmen like Altiero Spinelli and
Jean Monnet.
These two men embodied two distinct approaches to European unity, and
the distinction is important even today. Spinelli was a federalist,
believing that local, regional, national, and European authorities
should complement each other. Monnet was a functionalist, believing
that, one by one, critical functions, and therefore ultimately
sovereignty itself, should be transferred from the national to the
European level. In the official European Community literature of the
1990s it is argued that "today the two approaches have been merged."
Perhaps so. The Maastricht Treaty owes much to a functionalist
approach, with its proposals that Europe should acquire its own
defense and foreign policies and its own currency. But federalists
will be happy with that, it is said, since the result is nonetheless
federation--that is, the creation of a new political entity with the
critical characteristic of a federation in that its laws are binding
on the member states.
Those who support the creation of a European federation sometimes
argue that federalism is generally misunderstood in Britain. They
tell us that in continental Europe it is about decentralization, and
that federal constitutions in a number of European states emphasize
the devolution of powers to states or regions. But the federalism
that is being unfolded at the European level is not like that. The
process of integration now being pursued from one intergovernmental
conference to the next is highly centralizing and owes much to the
Monnet-functionalist approach.
While Spinelli, Monnet, and others were advancing European unity by
whatever means they could, which in their day meant mostly devising
institutions governing economic and trading relations in Europe,
Britain held aloof from that process, while committing itself
directly to European security. Clearly it is a myth that Britain has
never cared about Europe. The British Empire lost nearly a million
combatantsin the First World War. In the Second World War, hundreds
of thousands of British people died at home, or fighting in and
around Europe, because of a commitment to the freedom of the
continent.
Following that war, at a time when the nature of the Soviet empire
was becoming clear, the British foreign secretary at the time, Ernest
Bevin, committed Britain to a Western Union, an alliance of European
and non-European states dedicated to providing their peoples with
security. In 1954 attempts to create a European Defense Community
were scuppered by France. But again a British foreign secretary, in
this case Anthony Eden, made an historic commitment on behalf of his
country to maintain land and air forces in Europe for the following
forty years, thus providing an unmistakable guarantee of Britain's
willingness to fulfill its obligations if the security of our allies
were ever violated. It was a remarkable undertaking for an island
nation to make, especially given its traditional policy of
maintaining a small army and avoiding continental military
commitments.
We need to bear in mind this history in order to understand the
strength of the impetus to European integration. The momentum derives
fundamentally from an understandable fear of war. That is what lies
behind Chancellor Kohl's famous remark that European integration is
"a question of war and peace." We all subscribe wholeheartedly to the
objective of achieving peace and security.
Furthermore, Europe is right to sweep away barriers to trade,
investment, and mobility across the boundaries of the nation-states
of our continent. But there are many different means by which those
objectives can be achieved. The functionalist, that is to say
centralizing, model now being applied by the European Commission
(EC), and by most of our partner countries, is not the only available
paradigm. Nor are all those who oppose the present course
anti-European, still less chauvinist or xenophobic. General de Gaulle
was famously in favor of a Europe des patries, and opposed the
tendency of the EC to acquire new powers for itself. He employed
rough tactics to establish the principle that nation-states should
not be overruled by majorities on matters of vital national interest.
How could it be that someone who valued Europe, who had fought for
its freedom and knew as much as anyone did about war, still nurtured
a belief in the nation-state?
The answer to that question requires us to consider more deeply the
causes of conflict. Those who want to create a United States of
Europe believe that nationalism has been the principal cause. They
think that if you can replace the nation-states, and make the nations
of Europe dependent on each other in a new European state, you will
have abolished the main cause of war.
But it is not enough to assert that European wars have been caused by
rampant nationalism. Two other elements have also been necessary:
despotism and a sense of grievance. In all the European wars of the
last two centuries the aggressors were despots: French
revolutionaries, kaisers, emperors, Hitler, Stalin. They capitalized
ruthlessly on some supposed injustice done to their nation, some
piece of territory that had to be restored to the mother or
fatherland, some minority that yearned to be set free from its
foreign repressor.
The Centrality of Democracy
Europe owes its security since World War II less to the absence of
nationalism than to the presence of democracy. By far the greatest
achievement in Europe at the end of the Second World War was the
restoration of democracy in Germany and Italy, and the liberation of
those countries that had been conquered by the Axis powers.
Subsequently, Spain, Portugal, and Greece rejoined the family of
democratic nations. My father fought for democracy in Spain and was a
refugee from tyranny for twenty years. To see democracy restored
there brought my family great joy. Following the fall of the Iron
Curtain, most of Eastern Europe and even Russia have become young
democracies, bringing a similar joy to the millions who had suffered
there. Democracy is precious to everyone, but its value is most
appreciated by those who know what it is to be without it.
The European Union, along with NATO and other European institutions,
has played an important part in the extension of democracy through
Europe. The member states of those institutions have provided a
shining example of both freedom and material success, and Western
institutions have supplied the template of democratic values to be
reproduced by the new democracies if they are to aspire to join those
institutions as new members. Europe is more secure from conflict
within the continent now than ever before precisely because there
have never been so many democracies as now, for it is almost
inconceivable that democracies would go to war with one another.
Viewed in these terms, democracy acquires a special value. It is not
merely, as Churchill said, the worst system except for all the rest;
it is the form of government that best assures peace. If we do not
have peace and security, we cannot hope to achieve anything decent in
life. For all its alleged deficiencies, without democracy the abyss
would yawn before us. And that is precisely why European integration
is not the means to achieve the security of our continent. For that
integration is being designed in a way that, if persisted in, will
sharply reduce democratic control. If we shoehorn the nations of
Europe into an artificial union, we will not abolish nationalism; on
the contrary, we shall risk stirring it up, while at the same time
undermining democracy. The danger is that we shall make people feel
that their national interests are being overlooked, and that they
cannot assert them through the ballot. That risks exactly what the
architects of the new Europe wish to avoid: destabilizing Europe,
creating tensions, and releasing resentments that damage the present
good relations among European nations.
The earliest Greek democracy depended on a very small populace--the
people or commons of a city, those who could be expected to gather
together in one place. Their commonality was evident. In the modern
world it is more difficult to be precise about what constitutes a
people. It is obviously a matter of great controversy and can be
subject to change. Most nation-states have a common language, but not
all. Most nation-states have a principal nationality or ethnic group,
but not all. Many nation-states are geographically homogeneous,
containing only one ethnic and cultural group within their borders.
But some are not. The United States of America would not score very
high on any of these criteria, and yet it is undoubtedly a
nation-state. Its people are bound together by a clearly articulated
sense of national purpose and by a set of shared values, by a vision
of themselves and their place in the world. All of that provides them
with the things in common that make them a people. Much the same
could be said of most of the nation-states of Europe, though
admittedly some to a greater and others to a lesser extent.
For democracy to work, people need to have more than just a vote.
They need to feel a part of the institutions to which they elect
representatives, to feel properly represented in those bodies. They
need to believe that their vote can change things. When they do not,
problems can arise even within well-established nation-states. It
seems, for example, that a majority of Scottish people do not now
feel confident on those points with regard to the parliament at
Westminster.
The Scottish example is interesting because there is no ethnic or
linguistic difference between the Scots and English. England,
Scotland, and Wales are, taken together, geographically homogeneous
and distinct. The three nations share many common values and the
sense of a larger national--that is, British--identity. Little
wonder, then, that the Basques, Catalonians, Bretons, Bavarians, and
other groups in Europe are unhappy--or worse--when they feel that the
critical decisions that affect their daily lives are taken in a forum
within which they do not see themselves as properly represented.
The important conclusion for the purposes of my argument with respect
to Europe is that we will be storing up the causes of future
resentment and unrest if policy which affects people's lives and
livelihoods is made by bodies that are perceived as distant, or are
believed to be composed of people who are not democratically
accountable. The sort of domestic political decisions about which
people rightly feel very strongly are those that affect the level of
taxes, unemployment, and interest rates.
The Single Currency
That brings us to the single currency. The proposal to institute such
a thing in Europe involves a bigger step toward centralized
decision-making than any that has been taken before. It seems
difficult for many people in Britain to grasp that the fundamental
motivation for such a move is political, not economic. As Dr. Helmut
Hesse, a member of the directorate of the Bundesbank, has said,
monetary union is to be seen "as the last step in a process of
integration that began only a few years after the Second World War in
order to bring peace and prosperity to Europe." Dr. Hesse sees it in
those clear terms even though, as a banker, one might expect him
rather to highlight the economic significance of the change.
With a single currency, the responsibility for monetary policy will
pass from the governments of the member states, or from their central
banks, to the EU central bank. Member states will be compelled also
to transfer their foreign reserves from their national central banks
to the European Central Bank. They will also be required to limit
their borrowing to maintain convergence. The effect of transferring
reserves will be to make it extremely difficult for any member state
to run a deficit; the motivation for limiting its borrowing is to
provide a means for imposing sanctions against it, should it
nonetheless persist in running such a deficit. It does not take much
imagination to realize that a constraint on the level of borrowing in
practice translates into a severe curtailment of the freedom to
decide both the level of public spending and the rate of taxation.
The Chancellor of the Exchequer, Gordon Brown, has claimed that there
is "no question of giving up our ability to make decisions on tax and
spending." I do not know whether that claim owes more to naivety or
to dishonesty. Contrast it with the unequivocal conclusion of the
chairman of the Bundesbank, Hans Tietmeyer, who hides nothing when he
says: "A European currency will lead to member states transferring
their sovereignty over financial and wage policy, as well as in
monetary affairs. It is an illusion to think that states can hold on
to their autonomy over taxation policy." The consequences have also
been accurately represented by Chancellor Kohl: "We want the
political unification of Europe. If there is no monetary union, then
there cannot be political union, and vice-versa." Indeed, there is no
currency in the world that is not controlled by a sovereign state,
and no sovereign country of significant size that does not control
its own currency.
But other advocates of the single currency often play down the
significance of its implications. For example, they argue that there
is not much difference between giving responsibility for the level of
interest rates to a national central bank and passing it to a
European institution. There is a huge difference. A national central
bank is or should be responsible to the national parliament or to the
government. Because its role and scope are embedded within a
democratic constitution, it can be held accountable for its
performance. Failures can be punished by dismissal of the governor or
board. The European Central Bank will not be responsible to any
democratic body, and the single currency itself is claimed to be
irreversible.
Decisions about interest rates are in effect decisions about rates of
inflation and unemployment, the most sensitive of all policy matters.
If people feel that in elections they are unable to give their view
of economic management through their vote, or replace the people who
make the policy, they will rightly feel that their democracy no
longer counts for much. What will be the point of voting for
political parties if they are powerless to change policy? Electors
will feel resentful and cheated.
When people feel like that, they become vulnerable to extremist
influences, something which we should wish at all costs to avoid.
Where democracy is working, intolerance and political extremism do
not attract widespread support. Nasty minorities remain merely that,
because the majority retains its confidence in the democratic system.
The population believes that grievances can be remedied, or at least
that those responsible for things that they do not like can be
dispatched at the polls. But once large numbers of people cease to
have faith in the system, extremism can quickly take hold, including
extremist nationalism.
No Exit
Enthusiasts for the single currency contend that arguments against
transferring control of the currency are based on an out-of-date view
of national sovereignty, since these days the scope for independent
action by each country is already severely constrained by economic
events elsewhere.
It is of course true that we are all affected by events outside our
control; but considerable scope for independent action remains. The
Bundesbank evidently feels that it has considerable autonomy despite
the impact of global forces. In Britain's case, the point is most
easily demonstrated by contrasting our experience earlier in this
decade inside the ERM (which made it impossible for us to reduce our
interest rates below 10 percent, and indeed on the last day of
membership caused us to propose raising them to 15 percent), with our
experience subsequently, when we were able to cut interest rates to
about 5 percent. There are degrees of freedom, and the fact that we
are not totally independent of outside influences is no argument for
throwing away the considerable scope for action that we still
possess. More importantly, our right to make choices for ourselves
should not be given up on such spurious grounds.
Following Britain's ignominious exit from the ERM, the British people
were free to vote against the Conservatives who had taken them into
it, causing the loss of many homes, businesses, and jobs. If we were
members of a single currency and the key decisions were taken by the
European Central Bank, voters would no longer be able to vote out the
people who made harmful economic decisions. What is more, at least in
the case of the ERM it was possible, however painfully, for Britain
to leave and thus to reverse policy. There is to be, we are told, no
exit from the single currency.
Some who know these arguments will object that democratic
accountability for the European Central Bank's decisions could and
should be established at a European level through the European
Parliament. The point demonstrates the success that Monnet and his
successors have had over the years. In the period following the war
it was impossible to find many advocates of the visionary notion of a
United States of Europe. But the pioneers of European integration
patiently made what progress they could with smaller scale projects
in the economic field, leading in due course to the idea of a single
currency. The single currency, however, will require the
centralization of decision-making to such an extent that, with its
imposition, even those who have until now opposed the whole idea are
likely to cry out for the creation of centralized democratic
institutions in order to provide some element of popular control.
This points up the crucial fact that the creation of the European
state has been approached in reverse order to the creation of almost
any other. Normally, a new state establishes its institutions of
government first, and then goes on to create its policies and its
currency. In this case, the common European policies and the currency
are being created first, with the intention that these should lead to
demands, in the name of logic and democracy, for the formation of the
institutions of centralized European government.
The European Parliament is not currently perceived by the British
people, perhaps not by any other associated population either, as a
representative body invested with much democratic trust and
authority. That is not merely because it is in its infancy. You can
create the apparatus of a state at European level, with a common
frontier, a single immigration policy, a common foreign and defense
policy, and a single currency. But democracy requires not only the
cracy but also the demos, not only the state but also the people.
What we do not have, and what we cannot conjure up, is a demos--a
single European people.
If the Scots now doubt that a democracy spanning from John o' Groats
to Land's End is capable of making every part of a compact island
country feel properly represented, then certainly no parliament whose
authority would span from Dublin to Athens, and which would be
charged with the critical decisions affecting the lives and
livelihoods of all the various peoples between those two points,
would be capable of satisfying the democratic requirements and
aspirations of each of our populations. The peoples of Europe are too
different from one another, their histories, cultures, languages, and
values are too diverse, for them to be brought together into one
state. We can and should work closely together and co-operate for
mutual benefit, but Europeans do not have a common identity or view
of their role in world affairs. They do not constitute a nation, and
since they do not we should not try to create a European
nation-state. We should not try to do at a European level things that
nation-states should do. It is the latter who should take the most
sensitive policy decisions because they require democratic control,
and democracy can work only in a country in which people share
values, history, and cultural tradition.
Misreading the Future
One of the boldest efforts of propaganda by the enthusiasts for
European integration is the attempt to portray themselves as modern
and forward-looking. They are the opposite. They are mainly motivated
by a fear that the past may repeat itself, that is that Franco-German
rivalry or rampant German nationalism may re-awaken. They propose a
centralization of power that runs flatly in a direction opposite to
the march of history. Have we not seen in our own lifetimes one old
empire after another dissolving, and unions of states collapsing in
failure?
The European integrationists are out-of-date in another way too. They
see European political union as a necessary response to global
competition, believing that we must react to the challenge posed by
industrial and trading giants like the United States and Japan by
creating a giant Europe. Chancellor Kohl has claimed that "the
nation-state . . . cannot solve the great problems of the
twenty-first century", and that Europe has to "assert itself." Dr.
Hesse has said that "a multiplicity of small states is not suitable
for the world economy today."
That sounds plausible but is false. Global competition is indeed
between industrial giants, but they are giant companies, not
nation-states. There may well be an argument for industrial mergers
in Europe, for example between defense contractors in France,
Germany, and Britain. But that is a completely separate agenda from
political integration. Paradoxically, some of the people who are
spurring us on toward political union are also those who still
believe in national protectionism, and therefore refuse to implement
policies that would bring about European industrial rationalization.
Some of those who think that the right response to global competition
is to create a bigger state also believe in a bigger role for the
state through more interference and regulation. That frame of mind
has produced the Social Chapter, and is a strong influence within New
Labour. Such people believe that global competition will whittle away
worker protection and social standards in the developed world, and
that we must create a large European corral in which they can be
defended against outside pressures. True, New Labour is divided on
this issue, and it also spends a part of its time arguing against
such protectionism, advocating the spread of flexible labor markets
instead. In that second view they are right. Flexibility, along with
rising educational standards, will enable us to compete and to
improve our social standards. Excessive interference by governments,
whether at national or European level, is clumsy and unresponsive,
and it has already played a large part in creating unemployment
levels in Europe well above those of the United States.
We are being led toward a Europe that displays many of the
characteristics of Britain twenty years ago, a Britain, let it be
remembered, that was reduced to borrowing massively from the imf.
Europe is populated with over-manned and protected nationalized
industries. In many places private sector managers are in thrall to
trade unions. Business is tied down by government bureaucracy and
interventionism. Public spending is appallingly high. There persists
the belief that Europe can go its own sweet way, unaffected by the
assault from international competition, provided that the fortress
walls are built high enough. Twenty million unemployed Europeans give
mute testimony--mute up until now--to the failure of those policies.
To present all of this as forward-looking is indeed a triumph for the
spin doctors. It is completely misleading.
Britain's Interests
There are those who argue that even if it is true that the single currency requires the centralization of important policy-making, and even if the sort of representative democracy to which we have become accustomed in our nation-states cannot be re-created at the European level, we are likely to get better decisions from the European Central Bank than we have had from our own governments in the past, and that will make people happier.
That is hard to believe. Unaccountable bureaucracy does not produce better decisions than democracy. The corruption and inefficiency in Europe's Common Agricultural Policy is surely sufficient proof of that. Furthermore, there is no evidence that a single currency will lead to better policies, greater stability, or greater economic success for its members. The single currency will be traded in world markets against other currencies. Whether it is more stable than the national currencies it replaces will depend on how good the policies are of those who control it. There has been no stability between the currencies of the United States and Japan - the world's largest and second-largest economies. Currency stability is an illusion, and in Asia there are now on display the scalps of many men who declared that their currencies would hold their values.
The case for Britain joining a single currency has lost whatever appeal it might have had when first presented a few years back. Five or ten years ago it was plausible to argue that Britain would be forever dogged by inflation, and therefore doomed to resort continually to devaluation in order to maintain competitiveness. Unemployment in the UK was stubbornly high. By contrast, Germany appeared to have discovered the secret of non-inflationary growth, and was able to compete successfully in the world on the basis of quality, despite the strength of its currency. How much better, the argument went, for Britain to give up control over its own economy in order to reap the benefits of the German economic miracle. Things look rather different now. Britain has gained control of inflation by its own efforts. It has lower unemployment than most of its European neighbors, and that is just one of many indicators that it is competing successfully. The current concern is not with devaluation, but with the strength of the pound.
Mr. Blair has said that he wishes to decide whether to enter a single currency solely on the basis of an economic assessment of Britain's best interest. I have argued that this misses the point of what is really involved in the decision. But, in any case, the economic case is very weak. It has been argued that the single currency is the logical completion of the single market. It is not. The greatest trading partners in the world, Canada and the United States, do not have a common currency and have no plans to establish one. At present, none of the countries with which Britain trades has the same currency as we do, and yet our trade with them goes on rising. I can see that there would be a small saving on transaction costs for companies trading within Europe if we were all to have the same currency, but it would be marginal. Against that, British industry should ask itself whether it really wishes to enter the next recession with the currency locked at its present level, and with the British government powerless to vary interest rates.
The grave danger for Europe, economically speaking, flows from the consequence of introducing a single currency where no single labor market exists. A single currency means that, in the future, variations in economic performance between one region and another cannot result, as they do today, in a downward adjustment of the currency in the less successful areas. Interest rates will have to reflect policy established at the center, not local conditions. The full impact of recession will therefore fall on unemployment.
In the United States, a vast area covered by a single currency, labor is very mobile. People who lose their jobs in a depressed area can and do move to another state in search of a job, however inconvenient it may be. But in our continent people cannot move at will to find new work. They face barriers related to language, qualifications, local culture, and plain prejudice. Some of those can be reduced with the passage of time, but most will prove intractable. Indeed, with the so-called Posted Workers Directive, approved under the Social Chapter, EU labor ministers seem determined to reduce labor mobility across borders.
There is another danger. Britain currently receives a notably high proportion of the inward investment coming from the rest of the world into Europe. Those investors clearly see value in Britain's membership of the and free access to its markets. But they also see it as an advantage that the British economy is more flexible and deregulated than most others in Europe, and over the last eighteen years has offered them stability and reassurance. In other words, Britain derives an advantage from not embracing all European economic policies.
If we join the euro, this advantage will be lost, as economic policy in Britain will be determined principally by events in the geographical center of the EU. There may well be a mismatch between conditions in Britain and Germany. Interest rates that suit Germany and France could be inappropriate to British economic circumstances, as they were when we were in the ERM. That will represent a bad risk for investors. It may then make more sense for them to invest where local economic conditions and interest rates are most closely related, that is in Germany. Imagine the impact upon British public opinion if unemployment is high, inward investors are drifting away, the government is powerless to vary interest rates, and the electorate is unable to change anything by electing a new one.
The Question of Security
I began by recognizing the importance of European security. All other objectives are secondary. The principal guarantor of peace in Europe has been NATO, which has provided a wholly credible deterrent against attack. With American troops positioned in Europe, and the awesome U.S. military capability evident, any potential adversary was wise to believe that America would go to war to preserve the territory of its European allies.
The establishment of NATO did not infringe upon the sovereignty of its members. Its treaty is explicitly an agreement of sovereign states who undertake, in accordance with Article V, to regard the violation of the territory of another member state as though it were a violation of their own and to respond with such action as they deem necessary.
NATO has no federalist destiny. In the half century since it was founded, and unlike the EU, it has passed no laws that bind its member states, and no court has extended its influence. In no way has it increased its powers since 1948, and the democratic accountability of its member governments has not been affected.
NATO is now responding to the new situation created by the end of the Cold War, recognizing that the greatest contribution it can make to security is to strengthen the new democracies of Europe. Membership in either NATO or the EU, or in both, can help underpin those democracies. The EU should follow NATO's example. It should be lowering the barriers for entry by the countries of Eastern Europe, not creating an inner core that requires qualifications that those countries cannot hope to attain. Negotiating admission for new members looks as if it will be a protracted, and maybe cantankerous, business.
The EU must also address itself to the remaining security issues on our continent. We need to do all we can to make Russia feel welcome in the family of Western democracies. Membership in either NATO or the EU is impractical, not least because Russia is a vast Asian as well as European power. But, again, the EU ought to be demolishing fences rather than erecting them.
In the case of Turkey, the EU seems to be almost careless in its behavior. The EU has made it clear to Turkey that, although it applied for membership years ago, there is no early prospect of admission. Meanwhile countries that have only recently become democratic and pro-Western are politely ushered to positions higher up the queue. Few things could be more important for our security than that Turkey should remain democratic and well-disposed toward the West. It is being kept at bay, partly because some European leaders apparently see the EU as a subset of Christendom, and partly because, with its manifest social problems, Turkey's inclusion would create substantial problems of integration. We have had to put heavy reliance on Turkey as a NATO ally during our conflicts with Iraq. It is very difficult for the Turkish government to sell to its people the merits of being a good member of NATO, and it is difficult for us to persuade Turkey to be reasonable over the Cyprus problem, when it is offered so little and treated so brusquely by the EU. Here is an instance where the EU has a clear choice between on the one hand maintaining its preoccupation with achieving "ever closer European union", and on the other hand using its enlargement to enhance the security of its members. It appears to have made the wrong choice. It has failed to think strategically.
The Turkish case serves to illustrate a broader truth. Those who are most influencing the progress of Europe have become dreadfully confused. They believe that European integration is the only guarantee of future security, and they are pursuing the objective with a single mindedness that borders on fanaticism. They are wrong. It is democracy that provides our greatest hope of future peace and prosperity. We should use our Atlantic and European institutions in every way we can to spread democracy and nurture it where it takes root.
The EU is entirely made up of member states that are democracies. But the EU itself is not democratic. Neither the EC, nor the Council of Ministers, nor the European Central Bank is democratically accountable; and they cannot be made so, because Europe is not a nation. It follows that the more we transfer decision-making away from the democratic member states to the undemocratic EU, the less shall we enjoy democratic accountability.
Moving away from democratic control is retrograde in itself, but it is also highly dangerous because disillusion and grievance provide a breeding ground for extremist passions of various kinds. In the interests of security, tolerance, and harmony among nations, in the interests of preserving the most valued gain of the postwar period, which is democracy, we should turn from the headlong rush toward European political integration, in which the single currency will be a decisive and irrevocable step.
Michael Portillo was a member of John Major's Conservative cabinet during 1992-97, holding positions as Treasury Secretary, Secretary of Labour, and Secretary of Defence. This essay is adapted from a lecture given in January to the Institute of Economic Affairs in London.
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