Orchestrating Europe (Text Only). Keith Middlemas

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СКАЧАТЬ so that a net gain was achieved. Furthermore, Davenport has stressed the fact that ‘the divergence in estimates is relatively limited, with the majority clustered in a range going from $7.5bn to $11.5bn for trade creation and from $0.5bn to $1bn for trade diversion.’

      Very few estimates break this ‘gain’ down into individual national components. Two studies that do this come to broadly similar conclusions. The Benelux countries benefited least, since they already had the lowest tariffs and because the mutual Benelux preferences had to be diluted in the common market (a case of trade erosion). There is a noticeable gap between these countries and the other three. Despite having the next lowest tariffs, Germany benefited the most, reflecting both its export structure and its ability to make inroads into the markets of partner states. France and Italy followed close behind.²³

      Some authors contend that these calculations underestimate the impact of trading blocs. They stress that increases in market size and the impact of certainties in irreversibly reduced frontier barriers to trade induced a favourable investment climate and economies of scale, at least in sectors engaged in trade. Indeed, in the Italian case, the difference between a hyper-efficient export sector and a more backward domestic sector had led to the economy being analysed in terms of ‘economic dualism’, even before the full impact of the EEC was felt.

      Growing commercial interdependence especially among the EEC states prompted concern among their governments over whether or not to tie their currencies closer together. The implications of moving to convertibility in 1958 quickly became apparent because the US balance of payments deficit remained acute. In the 1950s, this had been the main source for replenishing reserves. By the early 1960s, however, central banks in the EEC member states held about all the dollars they wanted. Yet the inflow of dollars continued unabated, attracted by the investment opportunities offered by the rapidly expanding EEC economies, or seeking a quick return by exploiting the relatively high interest rates on offer in Europe. Some of these funds were exchanged for US gold, some remained in the vaults of European central banks, and some were held by the private banking system. The latter formed the basis for the so-called Eurodollar market and provided a growing wash of international liquidity highly responsive to changes in, or rumours of changes in, market conditions. International speculation in foreign currencies became a daily fact of life. In such circumstances the desire for some preemptive, collective defence mechanism assumed a higher place in the aspirations of the Six.²⁴

      Unfortunately, as Tsoukalis has pointed out, the Treaty of Rome provided ‘very little, if any, guidance with respect to monetary policy’. This was hardly surprising since conventional wisdom at the time assumed that the multilateral arrangements enshrined in the Bretton Woods agreements could be fulfilled – and did not envisage their imminent demise. Expectations were high, but the Treaty’s provisions for monetary integration or cooperation (arts 104ff.) were rather pale and dim, stipulating the liberalization of payments on both current and capital accounts. Within a framework of overall equilibrium in the balance of payments, member states were enjoined to pursue policies directed at high employment and stable prices. To accomplish this, it was seen as necessary – and apparently sufficient – that there should be a loose coordination of economic policy accompanied by the creation of an advisory monetary committee to observe, report and comment on current problems. Although exchange rate policy fell within the purview of this body, it remained a national prerogative. Should countries face difficulties, the Community could offer financial assistance in addition to making recommendations, but no fund for this was created.

      The first decade of the EEC’s existence brought various proposals but few achievements. It was characterized by almost uninterrupted balance of payments surpluses for the EEC-members and a parallel decline in the position of both reserve currencies, the dollar and sterling. After the devaluations of the French franc in 1958, the payments situation within the Community attained some equilibrium. The small, five-per-cent revaluations by the deutschmark and the guilder in 1961 stemmed largely from the size of their respective surpluses with non-members. The only internal EEC crisis was the Italian deficit in 1963–4 which was resolved by non-Community credits and without recourse to changes in exchange rates. Several initiatives for institutional change and closer monetary integration came from the European Parliament and the Commission.²⁵ Suggestions for closer consultations and the creation of a separate committee of central bankers were accepted in 1961 and 1964 respectively. However, more radical proposals, if not rejected outright, found little positive support among the member states, partly because monetary reform was seen as an issue that required the involvement of the USA and the UK, and partly because the ever-open question of British membership of the Community made several members reluctant to press ahead with more drastic schemes.

      Nonetheless, the increasing outflow of dollars and the need for a common line by the ‘surplus’ countries (which included all the EEC states) kept the issue of regional monetary reform on the agenda. In 1964 the French finance minister Giscard d’Estaing proposed the creation of a new reserve unit to eliminate use of the dollar and to serve the needs of intra-European trade. This idea was killed by a combination of the point-blank refusal of the US to contemplate such arrangements, the reluctance of some EEC partners, and a policy conflict within the French government. Jacques Rueff, architect of the French reform programme of 1958, favoured instead an attack on the pre-eminence of the dollar, through using the ‘rules’ of the international system rather than through changing them. Since the dollar was convertible into gold, France decided in 1965 simply to do just that; a decision that provoked d’Estaing’s resignation. Although member states shared France’s underlying concern, they were uneasy about these tactics; and varied in their degree of susceptibility to American diplomatic pressure. On this last point, West Germany was particularly sensitive to US pressures, since the country depended upon the large American troop presence for its security.

      A further impetus towards creating a Community attitude on monetary problems came from the decision in 1964 to adopt a common ‘unit of account’ for determining national prices. This implied that domestic prices would need to adjust proportionately to any future change in exchange rates. Although such adjustments were considered unlikely, the Commission wanted mechanisms to reduce the chances further still. At this point it faced opposition on the grounds that tying down one part of the monetary equation made no sense without tightening other components – a line of argument which had already been voiced by German delegations at various international gatherings for over a decade. They demanded economic policy coordination as a prerequisite for monetary union.

      The essential underlying assumption that international parities were somehow immutable was punctured by the crises of 1967–8. When sterling devalued in November 1967, a two-tier gold market was introduced in March 1968. As speculation built up against the franc, France introduced exchange controls in spring 1968. Germany provided a safe haven for funds but the government denied that an overvalued DM had caused the problem. Instead, in autumn 1968, it imposed extra taxes on exports and took fiscal measures to encourage imports. The Bundesbank’s stubborn refusal to revalue, despite massive pressure, worried all concerned and pressure for a realignment of exchange rates could not be avoided. But it was a symptom of the depth of the conflict that when the decision was made, the action was not coordinated. France, unilaterally, devalued by 11.1% in September 1969. With German honour thus satisfied, the DM was allowed to float that same month and was formally revalued by 9.3% the following month.

      These events produced a surge of interest in regional solutions. The Commission tabled two memoranda in the course of 1968, and in February 1969 the so-called ‘Barre Report’ was submitted. Although the reports differed in emphasis and tactics, they agreed on creating a new reserve unit, improving policy coordination and a establishing a mutual aid system. The Council of Ministers responded, since it also ‘recognized the need for fuller alignment of economic policies in the community and for an examination of the scope for intensifying monetary cooperation’. Even so, there was no immediate follow-up. Meanwhile, the need for some initiative was underlined by the situation created by the 1969 currency realignment. Since neither France nor Germany had wanted national farm prices to change in line with the new exchange rates, СКАЧАТЬ