Chapter 67 Section 4 Another Europe

Ten days later, on Friday, May 15, I will speak in The Hague after the Queen announced the Act to implement the Maastricht Treaty in her first speech in the new Parliament.My speech writing team and I have managed to include in a single speech all the main elements of a replacement for Maastrichtian Europe.I intend it intentionally to be Bruges Phase 2, and of course I cannot expect it to have the same impact as I am no longer the head of government.But it is also for this reason that I hope that my ideas will be more illuminating, drawing attention to new possibilities among Europe's broad-minded political elites.

I began my speech by likening the architecture of the Belmont Tower in Brussels - the headquarters of the European Commission, which is about to be demolished - to the political structure of the European Community, saying that it is "imbued with the spirit of the past and the future".Things have changed so much since the founding of the Community that many big questions have to be rethought.Looking back at its origins and development, I distinguish between two distinct economic traditions—the liberal tradition and the socialist tradition.The time has come when Europe has to choose between these two traditions.Federalism in Maastricht was basically a product of socialist ideas.It involves some degree of centralized control.I think, in fact, what it contains is:

…a major intellectual error, (it) assumes that the future model of government is a centralized bureaucratic model that funnels information upwards, makes decisions above, and dictates downwards. What was considered the wisdom of the times in 1945 was actually a primitive fallacy.Hierarchical bureaucracy may be suitable for organizing a small business facing strong external competition - but in almost every other case it creates stagnation and inefficiency. …As Greater Europe expands, the forms of cooperation it will require will necessarily become more diverse, and its model should be not that of a centralized bureaucracy, but of a market—not just of individuals and firms, but of A market where governments are contestants.In this way, governments can compete with each other for foreign investment, advanced management and high income earners through lower taxes and fewer regulations.Such a market would require governments to accept financial discipline, since they would be reluctant to drive away expertise and business.Such a market will also help to formulate some financial and management policies to produce the best and overall economic benefits.Not surprisingly, socialists don't like it.Naturally, for this market to work, governments free from foreign control must retain most of the power they have over social and economic affairs.As these governments are closer to and accountable to their constituents, it is all the more necessary that we retain power at the national level.

Based on this analysis, I see two clear changes.The first conclusion I draw is that there is no reason to require the participation of all Community members every time a new initiative concerning Europe is proposed.If Europe did enter new territory, separate treaties would have to be signed expressly stipulating the powers surrendered: We should look at a multi-track Europe, where specialized groups of different countries, such as the Schengen group, establish cooperation and integration at different levels on a case-by-case basis.This structure will not be as neat as graph paper, but it will accommodate the diversity that emerged in post-communist Europe.

Second, the European Commission should only have less powers, far from giving it more powers.In fact, in its current form, it doesn't need many powers.In any sense, it should not continue to have legislative responsibilities and powers; it should become an executive agency that only implements policies rather than formulating them. Even more intolerable, I mentioned a problem that everyone is thinking about but is not on their agenda, the "German question".I applaud the achievements of the Germans and agree with some of Germany's characteristic policies, such as its currency policy and recognition of Slovenia and Croatia.But I think we have to face the fact that in a reunited Germany, its strength has become a problem.The Germans themselves recognize this, explaining, for example, why Chancellor Kohl and the German political establishment are so eager to get their country "rooted" in Europe, limited by the federal decision-making body.However, tying German Gullivers to the federal European Community is not the solution to the problem, because Germany's advantages in the European Community are so great that the federal system can only strengthen Germany's power and cannot restrain it.Instead we have to go back to the politics of the balance of power, because the balance of power ensures that countries like Britain and France can stand up to Germany if it pursues policies that harm our interests.At the same time, perhaps the most important factor in any modern balance-of-power politics is the fact that the US military presence in Europe ensures that no European state will push beyond a certain line in asserting its interests.

Some accused this frank analysis of being anti-German.Not so.I firmly believe that reflecting the realities of power politics in foreign relations, rather than hiding them behind a veil of federal political correctness, could be equally beneficial to Germany and its neighbors.Germany is a rich and powerful country with many things to admire.But because of its size, location, and history, this posed a problem.The Germans are very liberal and responsible when discussing this issue (even if I happen to disagree with one of the solutions they have found for it).There's no reason why we shouldn't do this.

As in the earlier years of my opposition, I found it easier to talk about these issues in international relations abroad than at home.In England, I scrutinize every sentence for misinterpretation.I've always been aware that John Major should be free to lead the party and the country in his own way, so I sympathize with that. I made my first speech in the House of Lords in July 1992, during the debate on the British presidency of the European Community.It was a slightly strange experience.I know it will take some time to get used to the House of Lords, for there the formal courtesies, the decency of speaking and doing, are so obvious that there is nothing to call lively debate.In this speech I was able to point out what I considered to be a "dramatic change in attitude" brought about by the Maastricht Treaty in Europe.The Danes have just rejected the treaty in a referendum.In Germany, opposition to the single currency has hardened.The French will hold their own referendum.Conservative backbenchers have also begun to vocalize the growing anti-Maastricht sentiment in their own constituencies.

But by the autumn, events had discredited the European Federalist project far more effectively than I had in the eyes of all but the most ardent advocates.As 1992 wore on, the exchange rate mechanism came under increasing pressure, with the consequences of overvaluing the foreign exchange rates of the United Kingdom and others, and finally, on Wednesday, September 16, in an attempt to After unsuccessful attempts to thwart financial markets and drain an estimated £11bn of reserves, the British currency was withdrawn from the exchange rate mechanism when real interest rates hit a disastrous 8.4% (and could reach 11.4% the next day).One can feel that an economic panic is about to happen.Politicians and journalists reacted as if the 4 horsemen from the Apocalypse had just stormed the Bank of England.Government ministers tried to place the blame for the crisis on the (West German) Bundesbank.Critics, unconvinced by the ploy, tried to still place the blame on the government.

After the UK leaves the exchange rate mechanism on Wednesday (whether it's "black" or "white", according to your taste), I happen to be speaking at a finance conference on CNN on Saturday.I live in the British embassy in Washington and was preparing my speech when the above news came.I had to abandon my original draft of the speech, but the schedule with which I was promised to speak was so tight that I had to start almost from scratch on Friday evening.I worked all night in a room at the end of the corridor.Norman Lamont, the chancellor of the exchequer, who was in town for an IMF meeting, was fast asleep.At least I didn't hear the singing from the bathroom fruit.He probably already guessed what I was going to say:

It is not that the policy of the British government is not implemented well, but that there is a problem with the policy itself.Whatever happens, it would be embarrassing to break a promise to preserve a certain exchange rate.But if that promise was wrong in the first place, then breaking it should be met with applause rather than blame... I would not seek a scapegoat myself, whether in the UK or abroad.What we must do is to learn from what happened.The first and general lesson is that if you try to crash the market, the market will crash you.A country should not gamble with its savings.Therefore, intervention in the foreign exchange market should be very careful and have clear limits.The second lesson is that the exchange rate mechanism in its current form and its purpose is a major obstacle to economic development.I myself don't believe that the pound should be re-entered into the exchange rate mechanism, nor that other currencies can benefit from its combination of stiffness and fragility...

Since countries have different economic development levels and potentials, and their fiscal policies and inflation rates are different, the most flexible and realistic way to adjust the economy is to implement a floating exchange rate system.In this way, each country can adapt its monetary policy to domestic conditions, and there is no need for the executive to shout at the foreign exchange market... As with the exchange rate mechanism, it is time for a radical change in policy towards Maastricht.Naturally, the connection is strong both economically and politically.If European economies are so different that not even the exchange rate mechanism can control them, how will those economies respond to a single European currency?The answer is that there will be confusion and resentment that will make recent difficulties pale in comparison. The audience in Washington responded enthusiastically to the speech, and even the British news media responded well, even if the gist was different. "Sunday Express" thought it was "sublime in thought". The Mail on Sunday said: "Maggie got her revenge." The BBC said: "Elegant, I tell you", thus taking a middle ground. Partly because of damaged egos and partly because of the enormous political capital already invested in the Maastricht plan, the government has refused to rule out the possibility of returning sterling to the exchange rate mechanism.At the time, the rejection seemed unimportant.The situation when we left the exchange rate mechanism had convinced most Conservative MPs, the vast majority of the public and, very importantly, most people in finance that fixed exchange rates were dangerous.It appears that developments in themselves have ruled out a return to the exchange rate mechanism, so no formal commitment is required.Almost overnight, the perception of my point of view changed.I was "right after all".Unfortunately, by then the damage had been done, not least to the standing of the government and the Conservative Party. Naturally, a European policy tailored to meet foreign rather than domestic expectations has brought us to a unique situation where the fate of the controversial Maastricht Act is being decided by foreigners .While the Irish, Danes and French have all been allowed to hold referendums, the British government has refused to do so.But it is clear that if France had voted against Maastricht in the referendum, the British Parliament would not have discussed the bill.I discreetly did everything I could to encourage the anti-Maastricht movement in France.What I find very encouraging is that Maastricht's 3 main centre-right opponents - Philippe de Villiers, Philippe Seguin and Charles Pass - are clearly among the strongest in France. The ranks of the most powerful and charismatic statesmen.And, despite the bias of the news media, their campaign immediately struck a chord with the patriotic masses of France.However, the final strength is not enough, 50.95% to 49.05%, the majority vote still supports Maastricht.So, had the 269,706 voters voted against Maastricht instead of supporting it, Britain would never have implemented the treaty. Like the failure of the exchange rate mechanism, Europe's painful involvement in the former Yugoslavia has, in its own way, drawn Maastricht to scathing criticism.It will also be recalled that the terms of the "Mayo" envisaged a common European foreign and security policy, which would lead to a common defense policy and perhaps a common defense.Therefore, it is assumed that the Western European Union is to be strengthened. The first step in the "common defense" is the establishment of the Franco-German "European Legion".The crisis in the former Yugoslavia, on Europe's southeastern frontier, was immediately recognized by both people and the framers of Maastricht as a crucial, indeed decisive, test of these aspirations, Luxembourg's foreign minister, Jacques Poos, at the time Heads the "troika" of European foreign ministers responsible for directing common foreign policy.He eloquently stated that this is "Europe's moment." As he began mediation with his Dutch and Italian counterparts, he continued: "If there is one problem that Europeans can solve by themselves, it is Yugoslavia. It is a European countries, don't make decisions for Americans. Don't let anyone else make decisions." Turns out the Europeans proved that they couldn't manage the war waged by Serbia and the Yugoslav state forces controlled by the communists, let alone change that reality.Community diplomacy actually made the situation worse.Clearly, the Community continued to support a policy of preserving Yugoslavia long after what in fact amounted to a Serbian coup against the Yugoslav federal system.The "overseers" of the community were deeply involved in the complex situation of the war and did not explicitly condemn the aggressors.Even when the Yugoslav army withdrew from Croatia, it was allowed to station its heavily armed troops in Bosnia, its apparent next target of aggression.As recently as early 1992, when an exasperated Germany finally insisted on recognizing Slovenia and Croatia, despite the wishes of the majority of the community, there was an opportunity for a functioning European foreign policy based on consensus—not to mention common defense. Policy - sounded the death knell.