Europe on the Brink: Democratic Values and the Single Currency

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.

by Author(s): Michael Portillo

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

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

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.

Essay Types: Essay