The Path to Power

that body’s activities. Initially, the Commission itself determines whether the matter is something to be devolved under the subsidiarity rule. It is extremely unlikely that the rule would be enforceable in the European Court of Justice to any practical extent. In any case, it would not apply to those areas which do fall within the Community’s ‘exclusive competence’, thus ruling out its application to wide areas of Community law such as most of the internal market measures and many social provisions. Anyone who reads the Treaty closely and intelligently will see that Chancellor Kohl’s interpretation of it is a great deal more accurate than the British Government’s. And that, perhaps, is why it was initially made so difficult to gain access to the full text of Maastricht and why generalities and slogans were the preferred means of its exposition.

In fact, the attempt to portray Maastricht as the opposite of what it was met with only limited success. Anti-federalist Conservative MPs supported it only insofar as they felt it necessary to support the Prime Minister. The real argument therefore came to centre on the ‘opt-outs’ which Britain obtained. In practical terms, the best that could be said for Maastricht was that not all of it applied to us. Unfortunately, it is not at all clear how effective these exemptions will prove to be either in law or in practice.

It will be recalled that when John Major and I had been discussing the tactics required to resist pressure towards economic and monetary union in the summer of 1990, I had been quite prepared for the other eleven Governments to negotiate a separate treaty for Economic and Monetary Union (EMU). Under this, Germany and France would finish up paying all the regional subventions which the poorer countries would insist upon if they were going to lose their ability to compete on the basis of a currency that reflected their economic performance. I also thought that the Germans’ anxiety about the weakening of their anti-inflation policies, entailed by moves towards a single currency and away from the Deutschmark, could be exploited in negotiations. Above all, we must be prepared to use our veto — and be known to be prepared — if we were to bring our Community partners up against the harsh realities which would make them think twice.[70] Precisely how matters would have gone if this strategy had been pursued is, of course, now impossible to say. But there was no practical reason to worry about our being ‘isolated’, despite the hysterical incantations to that effect. We could have continued benefiting from the Single Market under the existing Treaty arrangements — while still having to tolerate the CAP and the incursions of the European Court. The only Gotterdammerung was in the frenzied imaginations of panic-stricken Tory MPs.

The problem with John Major’s alternative approach was that although it initially won plaudits, it left the fundamental problems unresolved. Under it, we would effectively abandon our attempts to win support for our alternative vision of the Community, going along with a new European framework which did not suit us, while relying on special exemptions which ultimately depended on the goodwill and fair dealing of people and institutions whose purposes were radically different from ours. Arguably, the changed approach actually made our position worse by accepting important points of principle about the Union’s future direction, for example by acceptance of the general objectives set out in Articles A and B, which will make it more difficult for Britain to argue for its own conception of Europe in the future.

As it turned out, Britain succeeded in negotiating two special ‘opt-outs’. The first exempted Britain from the regulations on workplace and trade union rights contained in the ‘Social Chapter’, and the second allowed us to opt out of the third and final stage of monetary union. The Government was absolutely right to resist the social provisions, which would have increased business costs, reduced flexibility and competitiveness and destroyed jobs. But this exemption relates only to new provisions and not to other directives on social policy under the Treaty of Rome amended by the Single European Act. These still offer a means of imposing the high social costs of Germany and France on Britain by the back door. A particularly important example, which has indeed become a test case, is the June 1993 ‘working time’ directive, which laid down a maximum forty-eight-hour week. This was introduced as a ‘health and safety’ measure under Article 118a to which qualified majority voting applies. The Government has mounted a legal challenge in the European Court. But the directives — whether on maternity leave or part-time employment — continue to flow. All of these measures would have one main effect — and arguably also have one main objective — namely, reducing the flexibility and competitiveness of British industry, to bring us into line with Europe.

Moreover, there is no doubt that the French, in particular, will do everything in their power to prevent transfers of investment and jobs to Britain because of our lower social costs. This was illustrated by the outraged French reaction to the decision by Hoover-Europe to transfer production of vacuum cleaners from Dijon to Cambuslang near Glasgow because, as the President of Hoover-Europe explained, in Scotland total remuneration costs were 37 per cent lower than in France. A large part of that difference reflects the cost of social benefits required by French law. What Britain regards as a desirable policy of keeping the burden of regulations and costs on business down the French denounce as ‘social dumping’. In these circumstances, the pressure on Britain to accept regulations which will damage business will continue and intensify.

Similarly, the ‘opt-out’ on monetary union is less than meets the eye. It has only given us the right to opt out of the third stage of monetary union, not the first or second stages. The precise degree to which the first two stages of the process limit Britain’s economic freedom in practice is debatable, though on any view it is considerable. Member states are required to ‘regard their economic policies as a matter of common concern’; guidelines on economic policy are to be established by the Commission and the Council of Ministers, and member states are then to be monitored for compliance with those guidelines through a system called ‘multilateral surveillance’. The Commission has acquired a power to monitor the public sector deficits of member states and to initiate procedures against the member state if it considers such a deficit to be ‘excessive’. During the second stage of monetary union, member states must prepare their central banks for independence (as Britain has already begun to do) and adopt and adhere to a ‘multi-annual convergence programme’ designed to align currencies for eventual monetary union.

Finally, each member state is required to ‘treat its exchange rate policy as a matter of common interest’. There is a danger that this will be interpreted by other member states and by the European institutions as imposing an obligation on Britain to rejoin the ERM and again to subordinate its monetary policy to the maintenance of an external parity. Although the effective shattering of the ERM in 1992/93 makes the future course of convergence towards EMU less predictable than at the time of the signing of Maastricht, the widened 15 per cent ERM bands are likely to be interpreted as being ‘normal fluctuation margins’ for the purposes of the Treaty’s so-called ‘convergence criteria’. This would permit an inner core of member states to proceed to the full currency union of Stage 3 with only limited slippage to the original timetable. And the basic problem with the British right to opt out of Stage 3 remains. Once an inner core had entered Stage 3 and formed an ECU currency bloc, Britain would come under strong political (and ultimately legal) pressure to maintain the pound’s parity against the ECU in accordance with its continuing Stage 2 obligations, and so to follow ECU interest rates. And if some member states enter into full monetary union, Britain would have no seat on the European Central Bank Board which sets the interest rates we would be expected to follow. In these circumstances the temptation for Britain to go the whole hog and move to the third stage of monetary union would be very great. The Maastricht Treaty makes it clear that Stage 3 is ‘irreversible’, which means that we would, at least under Community law, have no right subsequently to withdraw and issue sterling again. That would be a fundamental and crucial loss of sovereignty and would mark a decisive step towards Britain’s submergence in a European superstate.

The argument that this will never happen because the break-up of the ERM demonstrated the folly of fixed exchange rates in a turbulent world overlooks two important considerations. First, the history of the acceleration of moves towards federalism in Europe demonstrates that the federalists are not to be dissuaded by circumstances from pursuing their project: indeed, each blow to it only confirms them in their desire to move further and faster towards an irrevocable conclusion. Secondly, it would be possible to avoid much of the instability caused by speculative flows across the exchanges which caused the break-up of the ERM by moving directly to locked currencies and EMU. Of course, the consequences for the weaker national economies would be even more disastrous than they were as a result of overvalued currencies in the ERM. Large regional variations in economic activity, industrial decline and soaring unemployment on the periphery would follow in due course and these in turn would prompt heavy migration across frontiers.

But we would be brave to the point of foolhardiness to imagine that such consequences would necessarily lead to the abandonment of the venture. For such a favourable outcome would depend upon the health and responsibility of democratic institutions in Europe. But national political institutions are losing their powers to centralized European ones on which there is no real democratic check. In any case, it is an abdication of political leadership to expect hostile circumstances over which one has no control to relieve one of the responsibility of