A Matter of War and Peace

James Buchan on the Euro

If, as a consequence, the objects of desire, for which all sense has been extinguished, are displaced by the abstract representative of all such objects, Money, ... then the Will ... has barricaded itself into its last bastion where only Death can besiege it.


To say that the European continent has gone mad over money would be quite correct and yet miss the special character of its mental state. In Germany, France, Italy, Spain, Portugal and Belgium, but above all in Germany, the mighty realms of politics, diplomacy, commerce and public administration have been condensed into tiny and arbitrary numerical quantities: to be precise, tenths of a percentage point.

According to a protocol annexed to Article 104c of the European Union Treaty of 7 February 1992, known as the Maastricht Treaty, as glossed by a so-called Stability and Growth Pact adopted at Amsterdam on 16 June this year, the Governments of the Union must not spend more than they receive in taxes and other income each year than the equivalent of 3 per cent of their state’s national product. If they overspend that limit this year, or plan to do so next, they will not be permitted to take part in the common currency zone to be inaugurated at the beginning of 1999.

On 1 January of that year, rates of exchange between the member currencies are to be fixed irrevocably and for all time; and the present moneys will become merely forms or aspects of a new money, to be known as the euro, a hideous name that is hard to say in all European languages. Over the next three years, and not later than 1 January 2002, euro coins and banknotes will be introduced, and all contracts in the old moneys converted into euros. A little later, the old moneys will cease to be legal tender.

Because the present moneys of Europe express the commercial varieties of the Continent, and reflect in their movements one with another the changing fortunes of the European states, a rigid and immobile currency must diminish those varieties or itself risk cracking under the strain. For that reason, the candidates for monetary union have submitted to binding rules to make them more alike in the way they manage their public affairs. The purpose of the 3 per cent limit is to ensure that a notoriously spend-thrift state, an Italy or a United Kingdom, will not go on a borrowing jag and force up rates of interest for all borrowers in euros. The question now tormenting Continental Europe is whether 3.1 or even 3.8 per cent might still be considered, for the purposes of diplomacy, to be 3.0 percent.

At last month’s summit meeting of European heads of state and government in Amsterdam, in the restaurants of the Reguliers-dwarstraat, the feeding delegations passed scraps of spiteful arithmetic to the reporters’ tables nearby: the French are at 3.6, the Germans at 3.5, let’s keep ’em both out, ha-ha! A continent has been bound into the straitjacket of a set of percentages that have gained ever greater precision and authority as next year’s deadline for selection approaches; and have, like money itself in Marx’s Paris notebooks of 1844, assumed an alien and terrifying power over their creators.

The straitjacket has, naturally enough, disabled the Continental Governments: a government at peace that can’t borrow money can’t really govern. Without the state to spend money, Italy has fallen into slump: at a time of booming world trade, Italian business is contracting. Yet the cradle of branch banking, public credit and scientific book-keeping has set its heart on monetary union as a child sets its heart on a pretty toy: the Prime Minister, Romano Prodi, has taken to telephoning any journalist who dares to suggest that Italy might not make the cut.

The coalition government in Germany is disintegrating: ‘They just can’t bloody get any business through,’ said a European ambassador in Bonn last week. Helmut Kohl, great champion of the euro, has of late become so bad-tempered that the gentlemen and ladies of the German Foreign Office feel they must apologise for his manners.

In his speech to the French National Assembly on 19 June, Lionel Jospin, the Prime Minister, put forward two mutually contradictory propositions – socialist solidarity and the Maastricht percentages – which only penal taxation can reconcile. At the Amsterdam summit, which the Dutch Government had hoped would promulgate a new treaty to take the Union into Eastern Europe and the new century, meetings dissolved in bad humour and in business so sloppily drafted and debated that officials are still running over the stenographic records to try and identify what, if anything, was agreed. The reconstruction of Eastern Europe has slowed down: the Czech Republic, which depends on now stagnant markets in Germany, has suffered a chaotic devaluation.

This subjection of the Continent to a set of arbitrary figures is not merely a matter of the public administration. The electorates of the Continent, in whose name the whole thing is being done, have been disenfranchised. They have become what the Germans of Bismarck’s era called Manövriermassen, obedient formations to be moved around the field under the monocled glares of the general officers on the Feldherrnhügel. At the Amsterdam meeting, politicians, officials and reporters were isolated from the city population by a high steel fence, three thousand Dutch police officers, an impenetrable diplomatic language and an Ancien Régime luxury. Slipping through the fence for a long-standing appointment downtown, I felt reckless, light-hearted and plebeian. Reality, incarnate in a city tram, all but did for me.

Denmark will not join the first wave of monetary union because, as an official of the Danish Foreign Office explained to me that evening, there must, alas, be a plebiscite and the Danish people might vote against it. Jacques Chirac promised a referendum on the new money in 1994 but he sure ain’t doing so now. In Germany, the opinion polls show majorities that are opposed to the replacement of the D-mark while, simultaneously, being resigned to its disappearance. Senior MPs of both Kohl’s Christian Democratic Union and the opposition Social Democrats have told each other not to discuss the Maastricht deficit criteria because they might unsettle a) the financial markets and b) the federal citizen. Even the Greens have been brought into the euro-cartel. The old nightmare of the German Left of the Sixties, a society without opposition or even debate, seems to have carried into waking life.

There is no greater pleasure, says the Chinese proverb, than to see your neighbour fall off his roof. In Britain, which has devoted much of the last eight centuries to undermining and demolishing Continental schemes, the agonies of monetary union across the Channel should be a source of unalloyed delight. In fact, as British officials explain, the whole thing has gone far beyond a joke. ‘That might have been true of the previous government,’ said one such official. ‘Blair and Cook have made clear that they have no interest whatever in things going wrong. The last thing the UK Union Presidency wants nextyear is to have the Italians really upset that they’ve been excluded. Nor do we want some kind of chaotic postponement. The nightmare is that they will go ahead, on some unsound basis, which will then do real damage to the whole European enterprise.’

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