Michael Portillo och EMU

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Michael Portillo

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Is democracy under attack by those in Brussels at the 27 European countries.
Conservative Michael Portillo says it is.
Recorded from BBC This Week, 17 November 2011.

Democratic Values and the Currency
Extracts from a lecture given by Rt. Hon. Michael Portillo to the Institute of Economic Affairs at Church House, London, on l4th January 1998

“European integration is not the means to achieve the security of our continent. It is the wrong route.”

MY OBJECT TONIGHT is to discuss the single currency, but not as it is often talked of in Britain, as though it were merely an economic device which can be measured in terms of costs and benefits. I wish to examine it in the terms used by our partners, who see it as a project in reshaping the way our continent is governed, to create a political union that can free Europe from the fear of conflict between the nations.

The cost and causes of war

In the last two centuries the peoples of Europe have paid a terrible price in wars. In World War I, fifteen million were killed, mainly soldiers. In World War II, the toll was at least 41 million, of whom most were civilians. Those terrible events have naturally and rightly led highly distinguished statesmen to dedicate their lives to creating conditions in which war would not occur again. 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 past conflicts in Europe. The first is 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, much effort since the last war 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 between the empires of Christendom and Islam, both ideological and territorial. 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. But Germany's suspicion and fear of Russia, another part of the 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.

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, and I shall return to that later. First, let us look at how efforts to resolve the conflict 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, grew up as part of the humanist-pacifist tradition even before the wars of the twentieth century, but until the end of the second world war was largely confined to academics and dreamers. Thereafter, statesmen like Altiero Spinelli and Jean Monnet took it up. The 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 did not describe himself as a federalist but as a functionalist, believing that functions one by one, and therefore sovereignty, 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 appears to owe much to a functionalist approach with its proposals that Europe should acquire its own defence and foreign policies and its own currency But federalists will be happy with that, since the result is nonetheless federation, that is the creation of a new political entity

It has the critical characteristic of a federation, in that the federation's laws are binding on the member states.

Those who support the creation of a federation sometimes argue that federalism is generally misunderstood in Britain, and tell us that in continental Europe it is about decentralisation, and that federal constitutions in a number of European states emphasise the devolution of power to states or regions. But the federalism that is being unfolded at European level is like that. It does not emphasise devolution of powers to member states. The process of integration now being pursued from one intergovernmental conference to the next is highly centralist and owes much to the Monnet functional approach.

There is a myth that Britain has never cared about Europe. That is an extraordinary claim. The British Empire lost nearly a million combatants in the First World War, despite beginning the war with what the Kaiser called a 'contemptibly small army". In the Second World War, hundreds of thousands of British people died at home or fighting in and around Europe for freedom of Europe.

Following that war, at a time when the nature of the Soviet Empire was becoming clear, the British foreign secretary, Ernest Bevin, committed Britain to a Western Union, an alliance of European and non-European states dedicated to providing their peoples with security. In 1956 (?) attempts supported by Britain to creating a European Defence Community were scuppered by President de Gaulle at the Paris Conference. But the British foreign secretary, Anthony Eden, made a historical commitment on behalf of this country to maintain land and air forces in Europe for the following forty years, thus providing a clear and unmistakable guarantee for Britain's willingness to fulfil its obligations of the security of our allies were ever violated. It was a remarkable undertaking for an island nation to make, especially given our traditional strategy of maintaining a small army and avoiding continental military commitments.

Everyone can appreciate the terrible suffering experienced by Europe and sh in the objective of never allowing it to happen again. Furthermore, Europe 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 centralising, model now being applied by

the Commission, and by most of our partner countries, is not the only paradigm that could be used. Nor is it the case that those who oppose the present course are anti-European, still less chauvinist or xenophobic.

But it is not enough to assert that European wars have been caused by rampant nationalism. Two other things have been necessary too: despotism and a sense of grievance. Take any of the wars of the last two centuries, and it will be seen that the aggressors were despots: French revolutionaries, Kaisers, emperors, Hitler and Stalin. They capitalised 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.

European integration is not the means to achieve the security of our continent. It is the wrong route. Integration is being designed in a way that sharply reduces democratic control. If we shoehorn the nations of Europe into an artificial union, we will not abolish nationalism, indeed we risk stirring it up. The danger is that we make people feel that their national interests will be overlooked, and that they cannot assert them through the ballot. That risks exactly what the architects of the new Europe say that they wish to avoid destabilising Europe, creating tensions and releasing resentments that damage the present good relations between European nations.

The single currency

That brings us to the single currency. Most of the remainder of this lecture is concerned with the political consequences of introducing a single currency. The economic arguments against the scheme were made brilliantly in the speech that William Hague gave to the CBI, and I concur completely. I have a few comments on the economic consequences, but I cannot improve on what he said.

The proposal to institute a single currency in Europe involves a bigger step towards centralised decision making than any that has been taken before. It seems difficult for many people in Britain to grasp that the motivation 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

The responsibility for monetary policy will pass from the governments of the member states, or from their central banks, to the European Union 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 be required to limit their borrowing to maintain convergence. The effect of the first is to make it extremely difficult for any member state to run a deficit, and the effect of the second is to provide for sanctions against it should it nonetheless succeed in doing so. It does not take much imagination to realise that a constraint on the level of borrowing in practice translates into a severe curtailment of the freedom to decide either the level of public spending or 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 owes more to naiveté or to dishonesty. I have respect for the Chairman of the Bundesbank, Hans Tietmeyer, who hides nothing when he says:

Chancellor Kohl has accurately represented the consequences, when he said plainly: