Orchestrating Europe (Text Only)

The Commission also proposed, in November 1981, that anti-trust cartels should be read as part of an EC-wide strategy and not confined to the cases in individual countries.39 But this was not enough when set against the reality of member states’ defensiveness40 or companies’ breaches of competition policy, even if the Commission was not opposed to stronger linkage between managed industrial decline and managed external trade – especially given the renewed US response to Japanese competition in a range of hi-tech areas. The EC had to respond to the structural challenge, had to modernize and adjust more quickly, even if the costs were high. The problem was to recapture member states’ conviction that this was best done on a Community rather than a national basis.41

For all these reasons, hopes seemed to lie in the concept of the single internal EC market, flanked by components in research and development, regional policy and sectoral adjustment – a concept which member states, racked by rising unemployment and a sombre awareness in 1983–4 that they could no longer keep all their national champions alive, seemed more prepared to accept than after the first 1973 oil shock. This could of course also be read as a fulfilment of the Commission’s original plan for industry in March 1970, put tentatively in the Colonna Report on harmonization and industrial change, coming to fruition a mere fourteen years after the event.

Nine elections also took place in the EC during the period 1980–83,42 causing substantial political changes, especially in France at a time when domestic conditions were overshadowed by deflation, rising unemployment, and industrial discontent. Meanwhile, in a number of countries, notably the Netherlands, West Germany and Italy, public protests grew about the installation of Cruise missiles and the effects on NATO of the American arms build-up. In a much longer timescale, and in various ways, most member states also followed Britain’s lead in profoundly questioning their welfare systems’ efficacy, relations between state and industry, and the state’s role itself.

How different the responses were can be seen by comparing Britain and France. Whereas the Thatcher government in 1980–83, beset by strikes in most basic industries, an over-valued currency, and historically high interest rates, abandoned thirty years of neo-Keynesian macro-economic management and instituted deflation and tight control of money supply, reducing state expenditure at the height of the recession, France embarked on what has been described as ‘socialism in one country’ after Mitterrand’s PS/PCF victory in the May 1981 presidential election. While the rest of the EC watched the Thatcher experiment with a mixture of horror and fascination, as market liberalism gave birth to the privatizing of state industries on an unprecedented scale, Mitterrand’s government abandoned the Plan Barre (whose austerity had been partly responsible for Giscard’s unpopularity) and introduced a new policy of widespread nationalization.

Pierre Mauroy’s government, a coalition of Socialists with four Communist ministers, sought to reflate the economy by redistributing wealth in order to generate higher spending among poorer groups, and hoped to increase employment by classic job-creation programmes, including reductions in working hours. The price was high in terms of currency instability, while the budget deficit multiplied seven-fold in two years. Inflation stayed stubbornly high and the trade deficit nearly doubled.

The crux in France came with the major currency crisis in March 1983, following two earlier deliberate devaluations. Whereas the Ceres left of the PS (like the British Labour party’s left in the mid–70s) had been advocating protection, regardless of what EC partners thought or would permit, Mitterrand and the new finance minister, Jacques Delors, after an initial reconsideration in June 1982, changed radically the government’s whole economic policy to one of increasing austerity. The second package included not only a substantial enforced devaluation, but a budget freeze, a stabilization of the franc, and an end to public sector recruitment.43 Mauroy was replaced as Prime Minister by Laurent Fabius, and the remaining Communist ministers resigned.

France’s experience seemed to prove that no member state, even one with France’s record of political leadership, could act continuously contrary to the global trend – in contrast to the United States which, having first instituted ‘Reaganomics’ as the antithesis of New Deal interventionism, had actually arrested its industrial decline by an expansionist fiscal policy close to classic Keynesianism. But Mitterrand’s grand tournant also affected the EC’s political balance. In 1981, French socialism had consorted uneasily with Schmidt’s brand of social democracy in West Germany (even if some German commentators remained sceptical about its validity, assuming that Mitterrand was at the time finessing his own Socialist left and his Communist allies in the ‘common programme’). But once Mitterrand accepted failure in 1983, and adopted a policy closer to market liberalization and EC integration, revulsion from protection and isolation removed many of the French objections to EC enlargement, to solving the British budget problem, to reform of the CAP and EC institutions, and above all to completion of the internal market.

Mitterrand’s transition from a ‘worker’s Europe’ to ‘no Europe without a social Europe’44 occurred as Helmut Kohl became chancellor, leading a CDU/FDP coalition. With Hans-Dietrich Genscher as more or less perpetual foreign minister, and continued domestic principles of low inflation and monetary stability, Germany’s EC position barely changed. Balancing the Ostpolitik in the framework of EC integration again took the form of a low profile foreign policy, acceptable to both centre-left and centre-right in Germany, which avoided any semblance of desire to lead the EC, and set increasing emphasis on integration – to be achieved by the same Franco-German entente as before (see chapter 7).

The fact that by 1983–4, political and economic conditions had been created which made France a willing collaborator, not only in economic but in all dimensions, provides one major explanation for the EC’s subsequent regeneration. In achieving that, Kohl’s personal support strengthened Mitterrand, especially during the crucial French Presidency in 1984, as Schmidt’s had Giscard in the late 1970s, while governmental and institutional linkages supplemented the rapprochements between individuals. But that this could happen was only clear by mid–1983. At that point, the British had to accept that there was no advantage in pursuing bilateral Anglo-German or Anglo-French alternatives, a point already demonstrated when the foreign secretary Geoffrey Howe played a Gaullist card in May 1982 and tried to use the veto to prevent a settlement on agricultural prices, only to fail for lack of a minimum number of allies in the Council of Ministers.

Taken together, the years 1980–83 were a period of fluctuation in the EMS,45 nine elections, national defensiveness, distortion of competition, and the introduction of often blatant means to evade free movement of goods. All went far to undermine collective faith in the efficacy of EC legislation and rules. Trade rivalries and different responses to the Soviet Union seemed at the same time to align the continental EC states against Britain and the United States. Spanish entry to NATO in May 1982, and Greece’s factious game-play once Andreas Papandreou’s left-wing Pasok came to power in October 1981, suggested the existence of a new north-south cleavage in Europe, to add to the existing ones of large versus small states, socialist versus non-socialist governments, and the wealthy core versus peripheral regions.

At the centre, the Commission, under the genial but lightweight Luxembourger president Gaston Thorn, could find no obvious consensus about the EC’s future nature and functions. Some talked of a two-tier system and variable geometry or core-periphery models,46 while others turned back to de Gaulle’s model of a Directoire.

On the other hand, some operations at Brussels were steadily becoming more collegial, if not among foreign ministers, at least among their finance colleagues on ECOFIN. The evolution of Coreper, the informal association of member states’ Permanent Representatives, into a flexible instrument preparing policy for the Council, together with increasing specialization in the Council and its Secretariat, ensured that majority voting was coming into more frequent use: 90 times in 1979–84, as against 35 in 1974–9 and a mere 10 in 1966–74.47 Informal processes and pressures induced compromise and diminished the use of the veto: even France helped to vote the British down when they essayed the Luxembourg Compromise in May 1982. This represented a trend towards a philosophy of incremental momentum, of ‘getting things done’, about which Mitterrand and Thatcher, its foremost opponents, were evidently aware. The process long predated the 1980s revival, and owed much to the other, more integrationist states of Benelux, Italy, Ireland and Germany, albeit each for different reasons.

The pursuit of the internal market centred on three consequential proposals: firstly, the Commission’s own report on regenerating industry, reforming CAP, and solving the budget issue (June 1981), secondly, the committee set up by the Council to draft amendments to the Treaties, to which were added, thirdly, the topics of strengthening the internal market, energy policy, industrial innovation and research, together with proposals on Mediterranean agriculture and job creation, especially among the young. These can be seen as preparatory to the November Council Meeting in London under the British Presidency. But the French also put alternative proposals in October, and in a parallel action, Genscher and Emilio Colombo submitted independently to Parliament in November a draft European Act and statement on integration.

The London Summit might therefore have been the occasion for renewal. That it was not can be attributed partly to Britain’s budget problem and partly to the principle of unripe time.48 Nevertheless, Mrs Thatcher became the first Prime Minister to address the Parliament, and a number of concessions were made to its demands for greater powers over the budget process. (These did not stop the Parliament threatening Council with ECJ proceedings in September 1982 for its failure to institute a common transport policy. The European Parliament now saw itself, conjoined with the Court, as one means eventually to subvert inter-governmental dominion.)

Meanwhile, exposed to the recession and confronted by the greater spectre of American and Japanese inroads into their markets, industries and businesses, especially the larger and multinational firms, began to campaign more publicly than in the past for a more effective industrial policy, and for the long-promised internal market. Until around 1981, these efforts had, with the exception of a small number of individual multinationals, largely been on a national scale, in the context of member states’ own industrial policies – or lack of them,49 but such was the divergence between German policy and the French socialist experiment, or between Britain’s deflationary neo-liberalism and Italian support for the state sector, that in 1981–3 they began to involve themselves more directly. As a result, influence tended to slip away from ministers, downwards towards the interest groups.

Lobbying of the Commission by industrial players became a notable feature during the Thorn Presidency, encouraged by some of the Directorates’ entry into more specialized policy-mongering, and by the appearance of contentious issues such as the Vredeling Directive on worker participation which required of companies large expenditure and sophisticated rebuttal techniques. Sectoral institutions across Europe in the chemicals and car industries, and the varying national peak bodies – CBI, DVI, Confindustria and Patronat – had for some years secured a point of leverage in DG3 (responsible for industry), particularly in Davignon’s day, though rather less so with his somewhat hide-bound successor, Karl-Heinz Narjes. But this had never generally obtained with the Commission, and to judge from British sources (the only ones currently available),50 they and their members had habitually resorted to their home governments, especially in Germany. They had enjoyed varying success. In France they were generally subordinated to an administrative definition of French interests. In Italy they had largely had to make their own way to Brussels. Furthermore, from a position of influence in the 1970s, in Britain after mid–1980 the CBI found itself isolated from government in a way unprecedented in post-War history – yet still having to defend UK membership on the UK political stage, as if it were an open issue.51 (Operations of these networks are considered in chapter 10.)

In spite of the problems which national peak organizations encountered at home, their European counterpart UNICE was not their preferred choice for activity when it came to trying to influence the Council of Ministers or the Commission.52 On the one hand, their members could use the sectoral bodies which already represented each industry; on the other, they could form new organizations of leading industrialists, such as the European Round Table or the group around Guido Carli, governor of the Bank of Italy, which included important heads of banks such as Alfred Herrhausen (Deutsche Bank). The heads of large companies, many of them French, members of AGREF, the association of larger, private sector companies, notably less protectionist and conservative in their own outlook after Mitterrand’s 1983 turnabout, now looked to links with MEPs in the Parliament, such as the Kangaroo group, or developed their own specific companies’ commercial strategies: of which the Albert Report and Wisse Dekker’s report on behalf of Philips (Netherlands) are prime examples.

But whatever the mode of activity (which in the case of national organizations frequently overlapped), the central issues remained the same: abolition of non-tariff barriers and establishment of the internal market. The CBI’s European Steering Committee had indeed held this in its sights continuously from as early as August 1974, and from March 1977 was working closely with the French Patronat. Again, if it is fair to generalize from CBI records, governments used these peak organizations to achieve similar national ends, which in itself encouraged them to address Brussels more directly.53 But on the whole, these semi-public efforts took care to keep industry’s initiatives free of the political vortex during the confused infighting among member states in the period 1979–83.

Much of the industrialists’ work overlapped. Wisse Dekker remained a leading member of ERT while drafting his report, Europe 1990, with Philips’ backing. According to the CBI, 90% of their proposals coincided with his. Europe 1990 also foreshadowed the internal market White Paper in 1985, but since it was begun in the recession under the guidance of firms in the front line of exposure from American and Japanese competition, it was set in a defensive mode, tinged with protection. Fears of the social consequences of 10–12 million unemployed at a time when trades unions’ bargaining strengths in Brussels appeared to be reviving, conditioned its aims of reducing costs without hitting either wages or salaries. So many Ministries of Labour, Commission officials and MEPs felt soured by the way that the Vredeling Directive had been emasculated by a combination of industrial federations, UNICE, and the American Chamber of Commerce’s European Committee,54 that they were prepared to listen to ETUC arguments about the ‘transaction costs’ of ignoring the social partners – that is, predisposed to avoid electoral unpopularity and industrial relations conflict.

The CBI (which had fought Vredeling all the way with support from its government and Conservative MEPs) could see that its 10% divergence from the Dekker Report lay not only in its labour market policy but in important questions about how to address all non-tariff barriers together, how to incorporate financial markets, and how far to liberalize and deregulate, rather than erect new barriers where the Euro-borders met the outside world. How effective all this was in the general array of influence bearing on the Single European Act in 1985 is a question for the next chapter: here it should be noted that it aroused the interest of all the allies against Vredeling, among American firms, in the long-established European Committee of AmCham, and also among Swiss firms such as Nestlé and Ciba-Geigy, which were already habituated to working in the EC.

Older pressure groups joined in, under new banners: Jean Monnet’s Action Committee, which he had dissolved in 1975, was refounded in 1979 by Leo Tindemans and Max Kohnstamm, primarily to campaign for European union, but it included industrialists whose main interest was the internal market. When in the second half of 1982 the European Parliament produced a resolution for European Union, the Commission responded with its own proposals for reinforcing the internal market. At the Copenhagen Summit in December, heads of government were finally persuaded to call on the Council of Ministers ‘to decide on the priority measures to reinforce the internal market’.55

Of this, Arthur Cockfield would remind them, in his foreword to his White Paper on establishing the internal market, three years later. At the time, it led to a modestly constituted Internal Market Council and the beginnings of a concerted plan by DG3, together with officials of the largest member states, whose outward face could be read in a host of Commission papers arguing this as the only way to recover competitiveness;56 and (since EMU was always a contingent matter) currency and monetary stability. Under the German Presidency the plan gathered momentum,57 and at Council level culminated in the ‘solemn declaration’ on EC Unity at Stuttgart 19 June 1983.

Soon afterwards, in September, once the drama over French restraints on the entry of Japanese VCRs had been resolved, the French government produced a memorandum Vers une espace industrielle Européenne. A Commission mandate of sorts now existed to prepare something more specific for the Athens Summit in December. But too much Council time was being consumed by the acerbic British budget question (from which the French government took advantage to delay Spanish accession, reform of the CAP and structural funds). The hostilities which had attended the messy EMS general revaluation in March had also not entirely disappeared. The European Parliament was dissipating its energies on dreams of European Union inspired by Stuttgart (which Thatcher regarded as itself an illusion58 and which Mauroy also condemned as eroding the national right of veto). Systemic reform depended that summer on three assumptions: that West Germany would not drop its opposition to increasing the Community’s revenue by 1 % on VAT until the reform process had actually started (even at the risk of the EC’s temporary bankruptcy), that the British would not shout too loudly, and that Greece would handle its first Presidency competently.

On these assumptions and inspired by Stuttgart, senior officials in the Commission such as Fernand Braun (DG3) and Paolo Cecchini, Maurice Carpentier, Peter Klein, and Riccardo Perissich, prepared something more dynamic and far-reaching than Commissioner Narjes’ long catalogue of directives-in-waiting since the mid–1970s (which was not actually published until mid–1984). They were able to capitalize on work done in some Departments of Industry, notably in Bonn, London and Paris and on the technical harmonization and the implications of Cassis de Dijon, so that by October, Narjes could outline ‘a more general common approach’ on mutual recognition, rather than total harmonization, to the Internal Market Council. Since Britain, France and Germany now had the clearest policies in this area, Cecchini invited top officials from the Economics Ministry in Bonn, the DTI, and the French Industry Ministry to meet him at the Chateau de Namur, 15–16 October, and here, under very informal Commission auspices, a text was agreed and immediately translated into the three languages. This was fed indirectly to the Steering Committee texts for Athens, as a prototype ‘declaration for the internal market’.59 It was lost of course, in the Athens debacle, illustrating both the powers and limits of sub rosa Commission work. But its substance emerged eventually in the EC resolution, 7 May 1985, which indicates the strength of such little-seen trends.

There had been no reason before Athens to think these preparations inadequate. Greek demands had already apparently been appeased with a careful devaluation of the drachma and a scheme of transitional financial support. Greece now took 16% of the regional development fund budget. No fewer than seven special Council meetings took place to sort out in advance the reforms of CAP and the structural funds, together with forms of EC-wide cooperation on the technological challenge to competitiveness, a balanced package involving increased revenue, better budgetary discipline, and prevention of future imbalances to meet the British criticisms. Such a comprehensive package might conceivably have been steered between the British Scylla and the French Charybdis.

Instead a combination of Greek inexperience in the Presidency, and Pasok’s factious demands for yet more cash support, together with Papandreou’s erratic chairmanship, shattered Summit conventions and these tenuous agreements. But it should be added that other heads of government also played disingenuous roles:60 with the French Presidency coming up, Greece was not to have the glory. Nevertheless the fiasco was so total that it proved impossible even to draft an agreed communiqué.

Confusion among member states did not necessarily imply total failure. Within six months, under the French Presidency, all these questions had been brought into line, largely by Mitterrand, now at his peak, yet ever conscious of the need for West German backing. France and Germany were finally able to meet even Britain’s demands. But the passage was hard despite the fact that Commission, Parliament and most member states were within reach of each other. After Mitterrand’s speech on federalism at Strasbourg in May 1984, and Lord Carrington’s swift riposte on the budget, it needed the spectre of EC bankruptcy in March and Mrs Thatcher’s refusal of the ‘best offer’,61 before ministers finally conceded guaranteed thresholds on CAP farm prices, in order to phase out slowly the onerous MCAs.

At the Fontainebleau Summit of 25–26 June (just after the European Parliament’s second direct election) the deadlock broke on the CAP and the budget reforms, together with Britain’s contributions.62 Germany, which was to pay most of the debit, won a special subvention for German farmers. ‘Own resources’ were increased to the necessary 1.4% on VAT revenues, leaving loose ends to be tied up in Dublin in December with a final cash subvention for Mediterranean agriculture and the acceptance of an – as yet unformulated – integrated Mediterranean programme.

That in turn removed the southern French farmers’ objection to Spanish accession.63 Spain’s and Portugal’s negotiations, so long delayed by pretexts, were rapidly concluded in March 1985 and the Treaty of Accession was signed in June, providing for entry on 1 January 1986. Meanwhile meetings with EFTA ministers saw the beginning of negotiations on the European Economic Area which, however difficult at times, began what was to be a steady enhancement of mutual economic relations over the next five years. The EC itself came closer to a standards policy, and simpler border formalities with the adoption of a single Community Customs document. France and Germany declared that they would abolish border checks,64 and set off on the road to what became the Schengen agreement.

But the impetus went further. The Council at Fontainebleau appointed two committees to examine the EC’s future: one chaired by James Dooge (an Irish senator) on institutional affairs, the other by Adonnino (an Italian parliamentarian) on the prospects for a ‘People’s Europe’. The latter – a sop to the Parliament and its draft Treaty of Union – implied, however vaguely and rhetorically, the existence of a European citizenship and European representation. Fontainebleau thus meant more than Mitterrand’s re-establishment of his own and French leadership in Europe: it cemented the Franco-German core, so that Spanish and Portuguese entry could at last be agreed, it ensured that Jacques Delors (though not Mitterrand’s first choice) would become Commission President from 1 January 1985, and it removed the barriers against Iberian extension by promoting a package of reforms acceptable to all (even to the Dutch who disapproved of Germany’s payoff). But above all it restored momentum to a more widespread European process.