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Britain in the EEC
Page 78
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Economic and monetary union
MOST ASPECTS of Common Market policy are affected by the very different monetary and taxation policies followed by member countries.
The common farm policy is drastically hampered if member States' economies and currencies are not in step. The Nine countries — and this was reaffirmed at the 1972 Paris Summit conference — have embarked on an ambitious plan to transform their customs union into a full economic and monetary union by 1980, perhaps with a common currency.
Economic and currency union is seen by Community leaders as "the guarantee of stability and growth, the foundation of their solidarity, and the indispensable basis for social progress".
A strategy for concerted action in both the monetary and economic fields was mapped out in a series of Commission documents prepared in 1968 and 1969 under the direction of the former Commission vice-president Raymond Barre. The previous experience of the Community was drawn upon heavily in the preparation of plans for economic co-ordination. An ad hoc committee of national experts under the chairmanship of the Luxembourg Finance Minister, Pierre Werner, reported favourably on the draft proposals in 1970, and subsequently the Commission took a series of decisions on the proposals. Further Council decisions in March and April 1972, including one to narrow the fluctuation margin between currencies to a band of 2.25 per cent, renewed the impetus towards union. The continued floating of currencies in Britain, Ireland and Italy, not to mention the two-tier exchange systems in Belgium and France, the devaluation of the dollar and the floating of the yen, have certainly not helped to achieve the original Commission target of full union by 1980.
The second stage of Commission policy is due to begin on January 1 1974 when an ambitious and complex plan, embracing parallel action on various fronts, is due to be launched. The purely economic aspects cannot be seen in isolation since the plan indirectly involves greater co-ordination of social and industrial policies, especially joint action to improve working conditions, stronger consumer protection, the opening up of public contracts to all member States, the abolition of technical barriers to trade, and steps to help firms in different member countries co-operate on research and development.
Transport policies Many of these aspects, of course, will impinge on transport policies. The stronger consumer-protection aspect is already exercising transport trade associations since to bring into line conditions of carriage, standard insurance aspects, etc, of the various transport operators in the Nine countries is alone a task of great magnitude. Aligning drivers' hours and associated arrangements, such as the legal length of the working day or week, are also matters of great complexity. with enormous influence on operating costs.
A recent draft opinion of the Economic and Social Committee of the EEC said: "The setting up of a European Monetary Co-operation Fund must not be considered as a measure of monetary policy in isolation but as part of the corpus of legislation aimed at creating the Economic and Monetary Union." Such a union should be marked in its final stage by: either the total and irreversible convertibility of Community currencies among themselves at an irrevocable rate of exchange; or by the issuing of a Community currency.
Community bank?
The Committee, in its draft opinion, suggested that from the outset the creation of a Community Central Bank should be envisaged and that the powers of a national central bank (eg the Bank of England) would be vested in the Community Central Bank. Endowed with sufficient powers, the influence of such a central bank on credit policies etc in the Nine would be immense. Imagine the hue and cry if by some central edict the rules for hire-purchase deposits were made more stringent at the drop of a hat in Brussels or Luxembourg.
Two experts on the Commission's staff, Herman Wortmann, head of the monetary affairs division, and Florent Bonn, his principal administrator, conclude in a recent study that the Nine countries are approaching the point of no return in the search for Economic and Monetary Union. They say that: 1, internally, economic and monetary union is needed if the Common Market is to work properly and fully; 2, externally, the Community would form a single and therefore effective force in the international monetary system. On their own, member countries lack weight and must accept the role of pawns in a monetary game that can have decisive, and often unwelcome effects on their economies.
Trade disruption The report says that financial and trading interests throughout Europe are becoming increasingly alarmed at the continuing fluctuations of currency values, often without warning and not to be foreseen. Such fluctuations are playing havoc with the international trade which is so much more important to Europe than, for example, to the United States or the USSR. Fluctuating rates exacerbate inflation and weaken the role of national currencies against the primary international currency, the dollar.
As with virtually all EEC policies, the inter-action of one policy with another — sometimes apparently unrelated — is a permanent factor. Monetary union requires that regional policy must be strengthened as a parallel activity. "When the monetary union is complete" — I quote from European Community Information published by the Financial Times in association with the European Commission — "the balance-of-payments difficulties of the individual Community countries will appear in the form of regional imbalances.
"So far as possible these will have to be mitigated through automatic mechanisms, diverting the incomes of the richer and more dynamic regions into those which are at a relative disadvantage. This will mean that in declining or depressed areas, taxes must be less than public expenditure. The member countries will have to strengthen and co-ordinate their regional policies so that they operate effectively at Community level."
A ReRilation setting up the European Monetary Co-operation Fund was signed in Brussels recently by Mr Van Eslande, Acting President of the Council of Ministers. The temporary location of the Fund is at Luxembourg but its final location will not be decided until June 30. On that date the Commission will submit further proposals for developing and extending the Fund's field of action.
No one knows if the Nine will 'achieve their goal of full economic integration by 1980. It is hard to contemplate the complete alignment of tax systems, customs arrangements, etc, let alone the alignment of wage systems, holidays, social security and pensions arrangements Benefit to operators Economic and financial policies are largely determined by traders — perhaps in the modern world by the largest national and international trading groups. If it suits them to rationalize the old nation-state practices, perhaps abolishing in the process pennies, francs and lire, in favour of a single Eurocurrency, the transport industries and operators will not be the only ones needing to adjust their thinking in a radical way.