The European Single Currency: Has The Left Got It Wrong?
From New Interventions, Vol.8 No.4, 1998
THE European Union has now taken the final political decision to launch the single European currency next January. This is, of course, the most ambitious of all the projects for closer European integration which have been attempted since the birth of what was then called the European Community 40 years ago. The move to European economic and monetary union will have breathtaking political implications not only for those countries which join the "Euro" currency project, but also for those which remain on the sidelines.
The advent of EMU will inevitably generate a new impulse to the idea of closer European political union. The debate has already begun in at least some EU countries about what form that political union should take, how democratic control can be strengthened, and what broad economic and social priorities should be set for the single currency area. In most EU states, the trade union and labour movement is broadly in favour of the move to the single currency. So too are not only the social democratic parties and the bulk of the left socialist and Green parties. 0pposition is mainly restricted to the sections of the conservative right, and to the far right of Le Pen, Haider and the neo-fascists.
As is so often the case, the situation in Britain rather different. There is widespread opposition to the single currency on the left, although the grounds for this opposition range from objections to the potential impact of EMU on employment and public spending, to the outright defence of British "sovereignty" and Sterling in terms which are hardly different to those advanced by the Thatcherite right. The situation is further complicated by the fact that Tony Blair's New Labour is reluctant to back an early entry by Britain into EMU – on the grounds that it would force an unwelcome reduction in interest rates, and possibly require higher taxes on capital and on scarce ecological resources.
Indeed – as one left-wing critic of EMU has pointed out – entry into EMU would force British interest rates down, and would push the UK to close the tax gap with the rest of the EU. If the UK levied taxes on capital savings and the use of scarce ecological resources at the average EU level (and cut its military spending to the EU level), the government would have tens of billions of pounds at its disposal for improving public and welfare services, whilst keeping government borrowing well below the levels set in the Maastricht Treaty.
Perhaps inevitably, discussion about the impact of the single currency has got mixed up with reaction to the impact of global capitalist restructuring. The wholesale destruction of industries and communities, and the massive increase in unemployment during the 1990s, have been identified in some ways as a consequence of the preparations for the single currency rather than being – as is the case – an inevitable result of globalism and restructuring.
There is also much misunderstanding about the provisions of the 1991 Maastricht EU Treaty which laid down the key qualifications for countries seeking to join the monetary union. They include requirement for stable inflation, interest rates and exchange rates, together with lower targets for budget deficits and government debt levels. The reality is that countries running higher deficits or debt levels than those prescribed in the Maastricht Treaty have consistently ended up the victims of pressure from the international money markets. Such is the mobility of capital today that any government which unilaterally steps out of line in running excessive deficits or debt levels will risk a much more savage deflation at the hands of the currency speculators than anything envisaged in the single currency rules.
The key political question – the key class question – is who is to pay for the reduction n the excessive and inflationary budget deficits which all EU states generated during the inflation of the 1980s and the near slump of the early 1990s? The anti-EU lobby in Britain says this can only be achieved through more deflation and savage spending cuts. Interestingly, the Tories and New Labour mutter their agreement. But that is not inevitable. Deficits can be reduced by taxing the rich and those responsible for pollution, and by cutting arms spending rather than welfare spending.
Some of the 11 countries which are launching the single currency in January 1999 have actually increased public spending and employment whilst reducing their deficits to meet the EMU criteria. Look at Ireland, Denmark, Portugal and Spain. In Italy, the left insisted on a Euro tax on the better off. The Italian economy is now doing far better than the UK in generating jobs and growth.
In point of fact, Britain is the only one of the 15 EU countries at present facing economic slowdown, rising unemployment and possible outright recession. More to the point, the UK has – over the past two decades – slipped from being one of the more prosperous countries of the European Union to being amongst the four poorest. The weight of the evidence is overwhelming, as even TUC leaders such as John Monks have pointed out, that the deflationary dangers arising from isolation from the currency union will be far greater than any implied by EMU membership.
But, as Ken Livingstone has noted, the combination of interest rate cuts and some tax increases (to cover improved social spending objectives) is precisely what is needed to reverse the present grotesque over-valuation of sterling, and to avert a potentially serious economic recession in Britain over the next year or so.
The really important thing, however, about monetary union is not its short-term economic consequences, but the longer-term opportunities opened up by the advent of sovereignty-sharing by so many economically-advanced European countries. As more and more countries join EMU – which they will – the European Union will have the kind of influence on the global economic system which is quite beyond the capacity of even the largest single nation state. This potential is underlined by the fact that the 11 countries whose single currency application will be approved next weekend will between them be dependent on world trade for less than 10 per cent of their collective GDP, compared with an average of more than 30 per cent for each of them at present.
Nor is it true to say that the unelected European Central Bank will "run" the single currency. The ECB will run monetary policy with the objective of avoiding inflation. (By the way, have the left-wing anti-EMU types ever read Marx on inflation?) But the responsibility for economic policy (tax, spending, growth, jobs, etc) will rest with elected governments in the Council of Ministers. The left in the European Parliament (led by pro-EMU socialists such as Ken Coates, Hugh Kerr and others) are already mobilising a campaign involving the labour movement and wider social forces to demand policies for a return to full employment as well as socially and environmentally sustainable growth.
This reality is beginning to be understood by the left throughout the European Union. At the same time, some formerly pro-European single market conservatives now object to a closer European political union because they fear it may strengthen the influence of those who want serious transnational employment, social and environmental standards. Already, British New Labour is to be found well to the right on the European Union's political spectrum – as is clear from its stand on a range of issues before the EU Council of Ministers. And that is before the probable election of a social democrat/Green coalition in Germany later this year, which is bound to give some further leftward tilt to the EU's centre of political gravity.
The truth surely is that closer integration in Europe is a precondition for EU nation states exercising any serious influence on an ever more globalised economic system. In that sense, closer European integration is a precondition for safeguarding effective political democracy. The greatest threat facing national political democracies is precisely the widespread feeling that it matters little who you elect these days because important economic and social outcomes cannot be seriously affected by politicians who are impotent in the face of global business and other forces. This perception is being exploited with success by the neo-fascist far right.
If the left is not to end up joining New Labour and the other political parties in the same ideological telephone box, serious political choices will have to be canvassed for implementation at the European level, where they can influence the real world. This applies as much to the new post-Cold War agenda of peace-keeping and human rights as to issues of environmentally and socially sustainable forms of economic development. A socialist policy for a united Europe is not now a vague utopian objective, but an immediate and practical objective for the red/Green/independent Labour/socialist left. Only in this way can the seemingly all-powerful forces of the global market be brought back under social and political constraint.
European union has not led to greater centralisation of state power – rather the opposite. Even the UK state is now subject to the kind of constitutional deconstruction which has transformed power relations between the regions (and minority nationalities) and the "national state" in countries as diverse as Spain, Germany and Belgium. It is a political language better understood in Edinburgh, Cardiff and perhaps Newcastle than it is in London. It is a new language which has helped to begin to bridge the gulf between workers from the Unionist and the nationalist/Republican traditions in the North of Ireland.
Perhaps all of this explains why important parts of the left in Europe now seem to understand the potential of the European integration process. Movements as diverse as the German Greens, the Spanish left party and many in the Italian far left now support not only a single European currency, but also advocate a more federalising, democratic political system in the European Union. Where does the British socialist left stand on all this?