Understanding the eurozone crisis

This article is from the March issue of Total Politics.

The day-to-day eurozone crisis sometimes gets in the way of the longer perspective. Yet that longer perspective may be important. If we are to get out of the hole, it may be worth asking how we got into it in the first place.

Those who follow these matters tend to believe that Jacques Delors was the man behind the relaunch of the European economic and monetary union (EMU) at the end of the 1980s. I think they are wrong. The Delors project, leading to the Maastricht Treaty, would never have got off the ground without the impetus provided – more than ten years earlier – by Roy Jenkins during his term of office as president of the European Commission.

With hindsight, we have come to be wary – and weary – of men (and women) who are keen on leaving a ‘legacy’ behind. The case of Tony Blair and Iraq is the example that is perhaps most frequently cited. But I would suggest that Roy Jenkins’s determination to move the debate on EMU forward during his term of office at the European Commission has, in its way, proved to be as ill-advised as Blair’s Middle East obsessions.

I was and am a fan of Jenkins. I worked in the European Commission when he was president, and I found him – as I am sure that all those met him then did – charming, funny and tremendously intelligent. If people in Brussels sometimes called him "Le Roi Jean Quinze”, then they did so out of love and affection. When I wrote a novel about the Commission, called The Commissioner (later made into a film starring John Hurt), Jenkins was kind enough to provide a quote for the jacket: “This immensely readable book is strong on authentic detail”.

At a political level, I and many others admired what he achieved as home secretary in the Labour Government between 1965 and 1967, with his efforts to build what he called a "civilized society". As Chancellor, between 1967 and 1970, he gained a reputation for prudence, which later earned him praise from Margaret Thatcher. But today, given the scene that is unfolding around us, I can’t help feeling what a tragedy it was that he never became the leader of the Labour Party. If Jenkins had become prime minister instead of Jim Callaghan, rather than taking on the presidency of the European Commission, Europe would not be in the pickle it is today.

To explain: the UK joined the EEC on 1 January 1973. In January 1977, Jenkins became the first, and so far, the only British president of the European Commission. Having turned his back, at least temporarily, on British politics, he was determined to make his mark on the European stage. The over-arching goal he set himself was to push ahead with the policy of European economic and monetary union (EMU). Though EMU featured as an objective of the original Treaty of Rome (1957), not much progress had been made in the 10 years that had elapsed since signature. In 1969 Pierre Werner, the prime minister of Luxembourg, had been mandated to produce a plan to move things forward towards EMU among the ‘six’, but his mission had crashed and burned with France’s withdrawal from the project barely a year later. Jenkins came to Brussels, determined that his presidency of the European Commission would leave a ‘legacy’ behind it. That legacy would be the relaunch of EMU.

Jenkins wrote a full account of his four years in Brussels in his book European Diary 1977–1981, published by Collins in 1989. When it appeared, some reviewers amused themselves by alluding to the emphasis on ‘wining and dining’, while paying less attention to the serious political purpose. In my view, they did Jenkins less than justice. He makes it clear that, as early as July 1977, in between his first courtesy visits to the member states and routine Commission business, he "came firmly to the view that the best axis of advance for the Community in the circumstances of 1977 lay in re-proclaiming the goal of monetary union".

After developing his ideas during a break at his East Hendred home in Oxfordshire in August 1977, he discussed them at a Commission strategy weekend held at a hotel in the Ardennes on 8–9 October, before presenting them to the regular six-month meeting of foreign ministers at another hotel in the Belgian countryside. But the grand public unveiling took place in Florence on Thursday 27 October 1977 when Jenkins, in his capacity as president of the European Commission, gave the Jean Monnet Lecture at the European University Institute. The title of his lecture was “Europe’s Present Challenge and Future Opportunity”. This – all historians seem to agree - was the moment when life was first breathed into the corpse (or at least the moribund entity) of EMU.

Jenkins’s own account of this momentous occasion (European Diary, page 164) is endearingly succinct. I can’t help feeling that if he were writing that diary entry today he would have rather more to say. I quote the passage in full here: “Avion-taxi to Pisa for Florence, the first time I had been over the Alps in a tiny plane. Excelsior Hotel, Florence, at about 4.30. Delivered the Monnet Lecture at the European University Institute in a fine old gothic chapel, with a good audience of about seven hundred, and a friendly pro-European money demonstration outside. The lecture took almost exactly an hour, sounded rather better than I feared it would, and was certainly well-received.”

However enthusiastic the response of the Florence audience might have been, back in Brussels Jenkins had to battle hard to keep his Commission colleagues on-side. Ironically, it was Jenkins’s predecessor as president of the Commission, François-Xavier Ortoli (who had stepped down to become vice-president on Jenkins’s arrival), who argued most fiercely that Jenkins's approach to monetary union was too ambitious. But crucially at the 5 December 1977, meetings of the European Council, where the Commission’s proposals for monetary union were discussed, Jenkins had the support of British prime minister Jim Callaghan and French president Valéry Giscard d’ Estaing. Jenkins noted: “Only (German Chancellor) Schmidt looked as though he was asleep, which he mostly does when anyone other than himself or Giscard is speaking”. (Op. cit. p. 181).

The support of the first directly-elected European Parliament was also important. I had myself exchanged the life of a bureaucrat for that of a politician when I was elected as the MEP for Wight and Hampshire East in 1979. I can recall several occasions when Jenkins, with his great project already well launched, came down to Strasbourg from Brussels to make (successfully) the case for parliamentary support.

To call Jenkins the ‘father of European monetary union’ is to my mind a wholly accurate description. The Jenkins Commission (1977–80) laid the groundwork for EMU. Jacques Delors, of course, picked up the baton a decade later with his work on the Maastricht Treaty, a process that culminated in the introduction of the single currency on 1 January 1999. But if Jenkins had not shown the way with his 1977 Florence speech and subsequent energetic promotion of his proposals, EMU would have remained a dead letter.

If Jenkins were still alive today, would he regret having let this particular genie out of the bottle? I suspect he might.

Re-reading the text of Jenkins’ Jean Monnet Lecture, it is clear that he foresaw many of the problems that the eurozone is now experiencing. How is fiscal and budgetary discipline to be enforced in eurozone countries without central decision-making, including sanctions and penalties? Where are the democratic safeguards for individual countries? If funds have to be transferred from the centre to the periphery of Europe, where are the funds to come from and what are the mechanisms of transfer?

Yes, Jenkins saw the problems, but he did not in that Florence speech, or indeed elsewhere, propose convincing solutions. And the reason for this is quite simple: the concept of European economic and monetary union was fundamentally flawed from the start. Recent events have demonstrated that EMU cannot take place without Fiscal Union (FU). FU cannot take place without Political Union (PU), and PU, quite frankly, just simply is not going to happen if – as so many do – we wish to adhere to current democratic frameworks. EMU–FU–PU is inconceivable at the scale of the current 27 members of the European Union. I doubt if it is even (Should be was? Antonello) achievable at the scale of the original six.

Can we turn the clock back to that pre-lapsarian (in my dictionary this word hasn’t got the dash is just prelapsarian, Antonello) era when the EEC was a free-trading customs union, with member states retaining their own monetary and economic policies and, even more to the point, when national parliaments really did express the will of the people? I would argue that we not only can turn the clock back, but we must. Given the scale of the disaster that faces us at the moment –‘Eurogeddon’ is a good word – I would say that the ‘status quo ante’ is the best possible option.

The tragedy is that, as far as I can see, the official line of the European Institutions and member state governments – as demonstrated by the EU Council meeting held in Brussels at the end of last year – is not to row back from EMU, FU and PU but, on the contrary, to forge relentlessly ahead. Even the UK’s coalition government seems to accept that the solution to the eurozone crisis is for eurozone countries to strengthen, rather than loosen, the bonds that bind them. How ironic that is. Britain has spent centuries trying to avoid, and counter, the accumulation of hegemonistic power in Europe, whether it be that of France, Spain, the Holy Roman Empire or the Third Reich.

The December EU summit, it seems to me, took exactly the wrong decisions. Now is not the time to be aiming to underpin EMU by FU and PU, whether the negotiations take place inside or outside the strictly EU framework. The priority now is to unscramble the omelette in an orderly way. The bankers, the hedge-fund managers, and the sovereign wealth funds who have invested in the euro may squeal with pain at the prospect of the euro unravelling, but sticking with the common currency may in the not-so-long run prove to be a much more painful option.

If only Jenkins hadn’t taken that avion-taxi to Florence…

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