The Continent Divided

The Continent Divided

Nineteen ninety-three was to be a banner year for Europe. With the opening of the Single Market people would cross frontiers without visas and goods would flow unhindered by tariffs.


Nineteen ninety-three was to be a banner year for Europe. With the opening of the Single Market people would cross frontiers without visas and goods would flow unhindered by tariffs. It would be a triumphant year for the European Economic Community, marked by a quickening of the pace toward full integration. With the Maastricht treaty ratified by its twelve member states, the prospect of one currency and one central bank by the year 2000, and the rudiments of a joint foreign policy and joint defense, the E.E.C. was to move toward some form of federation that could stand up to the United States and Japan and act as a magnet for the rest of the Continent-first, the prosperous Swiss, Austrians, Finns and Swedes, later the wannabes of Eastern Europe.

Then, suddenly, this glittering scenario fell to pieces. Last June, the Danish people rejected the Maastricht treaty in a referendum. Three months later, the French gave the treaty the most reluctant of approvals. Then the Swiss, through a negative vote in a preliminary referendum, showed that the outside nations’ interest In joining was not as enthusiastic as had been thought.

Last month, the leaders of the Twelve met in Edinburgh to see what could be salvaged. The upshot was that the Danes were offered special treatment In the hope that next May they will reverse their verdict. Prime Minister John Major promised that the British Parliament would follow suit and ratify the treaty. Having reached a deal, the heads of government departed, relieved. But more is involved in this rewritten script than Just a change in the timetable. The single market was duly inaugurated on January 1 but under very gloomy auspices.

Let us try to draw some lessons for the future from the recent drama. It clearly confirmed the crucial role of the reunified Germany, which was both the cause of the crisis and the decisive (or undecided) actor in all of its stages. The strong mark and the Bundesbank’s high interest rates were at the heart of the financial storm that wrecked Europe’s Exchange Rate Mechanism, raising doubts about its future shape and even its survival. The other unfinished confrontation–in the General Agreement on Tariffs and Trade (GATT) negotiations, particularly over agriculture–revealed how far the E.E.C. has traveled since Its early semirural days. It also showed how deeply it remains split between those who, like the French, favor a closely integrated community and others, notably the British, who are reluctant to go much beyond a free-trade area. Thus deeply divided, Europe proved impotent to handle external tragedies like Bosnia and Somalia; potentially an economic giant, it is still a political pygmy.

Yet probably the most significant development has been the revolt of the people. Europe was built hitherto by big business and for big business, the politicians and technocrats cleverly preparing the institutional framework for a stage-by-stage advance. This institutional construction from above has now met popular resistance. It would be nice to report that this spells a revival of the left, the building of a Europe from below, by the people and for the people. Nice but, to put it optimistically, premature.

Primus Inter Pares?

In the package prepared in Edinburgh the E.E.C. for the first time broke the rule of parity among its Big Four. Hitherto Britain, France, Italy and the Federal Republic of Germany had eighty-one deputies each in the European Parliament. At the next election the first three will have six more each and the reunited Germany eighteen more. The Parliament has limited powers, and this symbolic gesture merely recognizes the fact that Germany has 20 million more inhabitants than its most populated partners. The real question is whether Germany will be satisfied for long with being simply first among equals.

The current upheaval is Europe’s German crisis. Maastricht, after all, is a byproduct of German reunification. The purpose of the Monetary and Political Union, designed in Maastricht in December 1991, was to keep the reunified Germany within the Western European orbit German Chancellor Helmut Kohl has been throwing his weight around ever since, notably as arbitrator in Franco-British conflicts.

But it is also the crisis of German reunification. When capital invades new territory, it tends to destroy existing industry in order to provide a market for its consumer and capital goods. This process, involving mass unemployment and a sharp drop in living standards, is very painful, but In Eastern Europe, on I.M.F. orders, the cost must be borne by the local working population. The former East Germany could not be treated quite so drastically without anesthetic. The subsidies to ease the pain for the East proved costly and the government tried to transfer the burden to the shoulders of the western German workers, who went on strike to defend their current wages. To maintain the pressure, the Bundesbank kept up a deflationary policy with high interest rates. The snag was that Germany’s rates set the standard for the rest of Europe, and the other countries needed low rates to keep their economies growing.

Add to it the fact that the “convergence” targets that had to be met in order to join the monetary union–a low inflation rate, budget deficit and public debt–were also deflationary. Speculators concluded that some countries would not bear the strain, and they made a killing. The lira and the pound went first, followed by the peseta, the escudo and the Swedish crown. The franc, genuinely backed by the Germans, survived. Since France spent more than $30 billion of its own reserves to defend the franc, one wonders how many more assaults it will be able to resist.

Indeed, the financial front is now covered with question marks. Will the Italians and the British re-enter the Exchange Rate Mechanism? Will the march toward monetary union be slowed so that all the Twelve can Join it, or will the laggards be left behind while the French, the Dutch, the Danes and the Belgians unite in a smaller group more thoroughly dominated by the mark? Will the French be able to wait until the end of March, after their parliamentary election, to make up their minds about what to do with their currency, and will the Germans be driven by domestic stagnation to lower their interest rates? The key to all these questions lies in the Bundesbank.

Financial Frankenstein

If the financial storm could play such havoc with Europe’s monetary system it is because the world of international finance has changed beyond recognition. The 1980s will go down in history as the decade when international monetary transactions leapt out of bounds. Prompted by the huge American balance of payments deficit, by deregulation, by technical inventions, by a computerized market working round the clock all over the globe, the turnover in all forms of foreign money reached the astronomical dally level of some $900 billion, more than the combined reserves of all the great powers. Whether this monster invented by capital will one day collapse, the crushing its begetter, is another matter. Its extraordinary growth is enough to explain the weakness of national governments and the vagaries of Europe’s currencies.

One of the E.E.C.’s contributions to this expansion was the abolition, in 1990, of all controls over capital movements. Europe may still be “social democratic” by American standards, with greater state interference in the management of the economy and in matters of health and education. These, however, are remnants of the past. In Europe, too, the 1980s were a period of privatization, of attacks against the public sector, of deregulation. (Social welfare budgets increased during that period but that was because of rising unemployment.) To put it differently, the nation-states of Western Europe are gradually losing many of their powers, but these prerogatives are not being devolved on the would-be European state with its capital in Brussels.

During the recent debates, one of the main indictments raised against the European Community was that it has a “democratic deficit.” However euphemistically put, the charge is richly deserved, though not because of Maastricht, which did not significantly expand the powers of the unelected Brussels Commission and Its Eurocrats. Like previous acts, Maastricht strengthens the prerogatives of the Ministerial Council, where heads of government and their assistants reach decisions, increasingly by a majority vote. The road to European integration may be so bumpy because it involves a strange attempt to abolish the nation-state with the help of nation-states, bargaining till the very end over their final surrender or transformation. To instill democracy into this system, it would be necessary to develop grass-roots politics in all member countries but also to grant more powers to Europe’s Parliament in Strasbourg, France, a transfer of sovereignty that many of the community’s critics are not ready to concede. The question is, What kind of Europe? This issue usually crops up whenever a matter involving Europe’s relations with the United States is at issue.

E.E.C. and the Open Sea

The latest confrontation between the two is taking place in the GATT negotiations over agriculture. This battle reminds us that in 1957, on the eve of the Rome Treaty, which set up the Common Market, one Frenchman out of four, and nearly one Italian out of three, was working on the land. Continental Europe was still very much the land of the peasant. Today one Frenchman out of twenty works on the land, just below the E.E.C. average. The Common Agricultural Policy, introduced in 1962, brought about this change. With domestic prices fixed at a high level and protectionist import duties and export subsidies in effect, this policy boosted output, turning the E.E.C. from a heavy importer of food into a producer of surpluses. And it did so by raising spectacularly the productivity of farm labor, while simultaneously smoothing the way for the mass migration of peasants to town.

The snag in this policy was that, since it absorbed nearly half the community’s budget, it was getting too costly. Therefore, last May it had to be revised. From now on, the emphasis in Europe will no longer be on maintaining prices but on direct subsidies to farmers. Thus the conflict with the United States is no longer over the policy itself but over the pace at which Europe will be carrying out the change of policy.

Food shipments account for roughly one-tenth of world trade. The fact that the United States and France rank first and second, respectively, as food exporters is not sufficient to explain the passionate nature of their clash. More than agricultural prices is at stake. The French accuse the British, who are keenest to make a deal with Washington, of yearning for quite a different community. The British want to water down the Maastricht treaty, the French say, then dilute it further by bringing in new members; they also want to exclude foreign policy or defense functions to preserve NATO’s domination. At the bottom of their hearts they really want an Atlantic free-trade area, say the French, who are fond of quoting Churchill’s dictum: Between Europe and the open sea, Britain will always choose the open sea.

Chancellor Kohl is thus confronted with a dilemma. Progress in European integration in the past has always been the result of Franco-German Initiatives. General de Gaulle worked hand in hand with Chancellor Konrad Adenauer until he realized that between Paris and Washington, Bonn will always choose the latter. Since Germany’s reunification, Kohl is no longer working under the same constraint. Will he support the British, because farming is secondary for him, or will he back the French to show that Germany can now stand up to the United States? The choice is momentous and, once again, it is Germany’s to make.

Europe From Below

So far I have looked at Europe from the point of view of the rulers because, until recently, they were the only ones involved in its construction. The Common Market, set up as a rampart against Soviet influence, spurred by the first fifteen years of unprecedented growth, to which it contributed, became part of the landscape. On the Continent at least, it was taken for granted. It is only In the past few years, with the Soviet empire out of the way, with dark clouds gathered on the economic horizon while unemployment spread, that the mood has changed. It is time that the debate should also shift from whether one 1s for or against Europe to what kind of Europe, in whose interest, for whose purpose?

Some progress has already been made toward clarification. There was a time in the British Labor Party, for example, when it was enough to be “anti-European” to be deemed progressive. That position was based on the absurd assumption that a Labor government in office would introduce reforms so radical that they would clash with the liberal framework of the Common Market. Actually, a contemporary Labor government would not hurt a capitalist fly, and its leadership now is, logically, for Maastricht, even if its electorate is not. Similarly, the French Socialists, whatever their original ambitions, surrendered to the forces of domestic capital in 1983 and are now wholeheartedly for a capitalist Europe. During the recent referendum debates, quite logically again, Socialists often shared platforms with moderate conservatives. Indeed, the main backing for Maastricht comes from this new establishment combining the respectful left and the respectable right, tweedledum and tweedledee, which may differ on many aspects of existing society but not on its fundamentals. The decade witnessed the Americanization of European politics, with the blurring of class lines and the glorification of the center. This trend seems to be stymied. The European crisis is also the crisis of the new consensus.

Who opposes this capitalist construction of Europe? On the right, you have the traditional conservatives, who really want to stop the clock. Next to them, however, you have the dangerous demagogues seeking their political fortunes by channeling discontent against “allen” scapegoats-the Arab, the Asian, the Gypsy, the Jew. It is the voice of these demagogues that now echoes loudly across the Continent.

Harder to define are the left-wing dissenters, best described as opponents of Maastricht in the name of a different Europe. Depending on the countries they come from, these include former New Leftists, progressive Greens, unorthodox Communists and Socialists disappointed by their party’s moderation. Theirs is the most difficult discourse to formulate. They must, at all costs, avoid any confusion with the jingoists. Hence they must show that they don’t give a damn about frontiers and are ready to cooperate with workers’ councils or labor unions of other countries. They must point out that only a Western Europe with grass-roots democracy and a different social structure can stand up to the United States and attract the rest of the Continent in a progressive direction. Actually, proponents of this still uncharted socialist alternative are to be found on both sides in the Maastricht debate: Some think the capitalist invasion must be fought within national borders, while others believe the battle must be waged on the European front.

The movement that is foreshadowed by such skirmishes will not be built overnight. And in one sense, there is ample time. However dramatic the warnings, the E.E.C. will not fall to pieces; it embraces too many commercial ties and vested interests for that. The rush toward some kind of federation, however, has undoubtedly been slowed.

In another sense, though, time is running out. The terrible stories from Bosnia tell us where “ethnicity” can lead; the racism in Rostock revives ghosts of the past. The murderers are among us. With the Stalinist Soviet model duly shattered, it is high time for people throughout the Western world to start thinking again of an entirely different society and not to do so in purely domestic terms.

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