German weakness that may undermine Maastricht

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Indy Lifestyle Online
THE FRENCH have been conducting their debate on the Maastricht treaty as if it were all about Germany. It is a recipe for German domination, the rejectionists warn; not at all, say the 'yes' campaigners, for the dangers of German nationalism will be far greater if the ties of the European Community are loosened. Michel Rocard, the former prime minister, has spoken of the need 'to preserve Germany from its demons'. His successor, Pierre Beregovoy, warns of a 'no' vote leading Bonn to look east, and encouraging an 'anti-democratic ferment'.

Not surprisingly, the Germans have been getting a little fed up with this theme. Chancellor Helmut Kohl, appearing on President Mitterrand's televised talk-in last week, wondered aloud about a French 'inferiority complex'. Private comments have been less circumspect. There is distress that the close partnership between the two countries, which has forced the pace of European unity, has yet to eradicate the old stereotypes and suspicions. It is all the more painful at a time when the xenophobic excesses that began in Rostock are giving the nastier stereotypes a boost. For the German generation that saw moderation and responsibility as the way to achieve political rehabilitation, it is yet another frustration of unification that this achievement is put at risk by newly acquired skinheads.

Might not, Germans add, the referendum actually be about France - and in particular its president, whose judgement on the political upheavals of recent years has been consistently faulty, whose insistence on a joint European script has only been matched by his readiness to depart from it when an opportunity for some political grandstanding has arisen, and who has been prepared to put at risk an enterprise of historic proportions to score points off his domestic opponents.

Similarly, the British have also seen the debate as being about France. It has been helpful in exposing the tension between that country's official communautaire position and the Gaullist tradition. The French were always unlikely candidates to accept any erosion of national identity. It shows that Britain is not uniquely half- hearted when it comes to yielding sovereignty, and it vindicates its pre-Maastricht soul-searching.

However, as John Major pointed out in his speech yesterday, in practice the political aspects of the Maastricht package go some way to to making the Commission more accountable, allowing intergovernmental co-operation outside the confines of Community law, and now in reinforcing the unlikely slogan of subsidiarity. Yugoslavia has already seen off the wilder visions of a common defence policy.

The key question that remains is the fate of the drive towards European monetary union. This was by far the most substantial element of the Maastricht package - reflected in the severe tests set for member states if they were to be candidates for the eventual union.

Because of this, Britain's Maastricht debate, in the end, also revolves around Germany, albeit in a different way from France's. The British remain more relaxed about Germany's politics; their concern is with the economics. Even Mrs Thatcher was less anxious about a revival of militarism than a German tendency to use its clout within the Community to oblige others to adjust to its economic requirements. The focus now is on the Bundesbank's high-interest-rate policy and how this forces others to follow suit.

Thus British commentary on the French referendum often implies that the only issue at stake is the timing of a realignment within the ERM, with a French 'no' appearing as a great opportunity for Britain to obtain devaluation and low interest rates without losing face. Yet the net result of the recent uncertainties may well be to tie Britain in more closely to the goal of Emu. In the face of the clamour for a fundamental shift in economic policy the Government has become even more explicit about the prize at the end of the road: not only minimal inflation but also a strong currency. This in turn reinforces the claim that Britain will be found at the 'heart of Europe', which must mean participating in its most substantial project.

The credibility of the Government's anti-inflationary policy demands a conspicuous embrace of the disciplines of the ERM; the credibility of the ERM is now seen to depend on the long-term prospect of the even greater disciplines of Emu. This longer-term prospect may well be illusory, but sterling is not yet so strong that Britain can be the one to stress the emperor's lack of clothes without hint of a slackening sense of financial discipline. The prudent policy appears to be to wait until the nakedness is generally acknowledged.

Which brings us back to the Germans. The mark is the foundation for the construction of Emu, yet it reflects an economy that is undergoing structural, rather than merely cyclical, change. Whatever happens to Maastricht, Germany is going to face continuing difficulties squaring its traditional methods of economic management with the unprecedented financial demands of unification.

With regard to the French concerns, this becomes in practice the most substantial check on future German ambitions. It cannot fund an expansion of its economic influence eastwards, even if it so desires. The message from Bonn is no longer the cocky one of two years ago - when its partners were told they'd better get a move on if they did not want Germany to scoop the pool of investment opportunities in the new Europe - but an increasing anxiety that unless everyone makes a concerted effort, the risk of catastrophic economic failure in a number of post- Communist societies will grow, yielding terrible social and political consequences.

All this has implications for both the position of the mark within the ERM and the longer-term prospect of Emu. For the moment the financial markets trust the mark above all other European currencies, but they may be looking backwards rather than forwards. If the Bundesbank's proud anti-inflationary record becomes another victim of unification, then all bets are off on monetary policy and the Maastricht process, whatever happens on 20 September. Contrary to French fears, the real problems confronting the Community are likely to arise from developing German weakness rather than strength.