Choice for Europe may be to abandon its common market: Andrew Marshall reports from Brussels on the Community's struggle for survival

JACQUES DELORS walked into the conference room in the Charlemagne Building on Monday night, and he was not happy. It wasn't just sciatica that was causing him pain. 'The journalists down there say that there's no Europe any more,' he said. 'Are you going to prove them wrong?'

The 12 ministers in the room had failed to reach agreement on dividing up the EC's structural funds cash, and Mr Delors had been brought in to knock heads together. But clearly bigger things were on his mind. 'There's no family spirit any more,' he told reporters later. 'This is an anti- European state of mind.'

The European Community is slowly emerging from the frying pan of a crisis over the Maastricht treaty and has found itself in the fire. The new assault on the European Monetary System, targeted on the French franc, threatens to wreck the exchange rate mechanism. Agonisingly slow negotiations over trade are still on a knife edge. And beyond, there is the prospect of unemployment in the EC reaching 19 million next year.

In this context the long, obtuse arguments about pillars and trees, the discussions of the 'F' word and the logic of the second stage seem woefully academic. The cornerstone of the Community has always been co-operation on economic issues; and this co-operation is ebbing. Economic and Monetary Union, the mainstay of the Treaty on European Union, is in trouble. In short, the treaty that John Major has so painfully negotiated through Parliament looks to be virtually dead on arrival.

The arguments over structural funds are just one sign of a deterioration in EC bargaining, and the return to the member states of powers the European Commission once guarded jealously. Bruce Millan, the British commissioner for regional policy, was outflanked by the member states, each desperate for a bigger slice of the 141 billion ecu pie. Buying off each country cost Mr Delors dearly, but 'it was the price of peace', an EC diplomat said. In the process, the EC lost a number of powers over spending decisions.

Solving the crisis in the European Monetary System will not be so easy. The renewed attack by speculators on the French franc is likely to continue. If they do not win this time, they will return in the autumn. 'There is still clearly very strong pressure,' said Bernard Godemont of Nomura research institute in Paris. 'They will not let go.' But the French government is in a bind. 'If they let Europe go, then they let everything go,' Godemont said.

The problem is not just a French one; it is a function of the weakness of the system itself. 'The trouble is that the EMS is not a very successful vehicle for monetary union,' one London banker said. The markets do not believe that a single currency is on the way, or that France is ready to pay the price of high interest rates. There is a credibility gap.

The most ambitious plan to tackle this prescribes that the French and Germans lock their exchange rates, or otherwise signal their intention to move rapidly to a single currency. They would probably take Belgium, the Netherlands and Luxembourg with them. Two-speed union - splitting the Community - seems the only answer, particularly to central bankers weary of political indecision, Godemont said.

Unemployment is not subject to quick fixes. The latest forecast points to unemployment of 12.1 per cent in Europe by the end of next year, up two points from 1992. Yet the Community has laid down targets for fiscal policy that make expansionary measures all but impossible. Budget deficits and government debt must be brought down; and that means cutting spending.

Social policy has to bear a lot of the burden of putting Europe right, in the Commission's view at least. Padraig Flynn, the social affairs commissioner, is working on a new green paper. 'We have to have this; we need something to show people that Europe works,' said Wim Bergans, a spokesman for the European Trades Union Confederation. Zygmunt Tyszkiewicz at UNICE, the employers' organisation, agrees - broadly. But the employers want evidence of a more realistic attitude from the Community on social policy.

They will probably get it. Commission officials say a 'new approach' to social legislation will target results, not methods. It will focus on deregulation of labour markets while providing social protection.

The social protocol of Maastricht, Britain's great bugbear, is still an unknown. A document specifying its operation is still in preparation. It will be hard for the other states to accept Britain's exclusion, which will lead to accusations that the British are profiting from their own low social standards at Europe's expense.

Such fears are exacerbating trade tensions within the Community. Joblessness and falling growth have made every state more jumpy about concessions that involve opening up protected sectors. France last week demanded a 'jumbo meeting' of foreign and farm ministers to discuss reopening agricultural negotations in the General Agreement on Tariffs and Trade (Gatt). 'We must face reality,' Alain Juppe, France's foreign minister, said. 'We must reopen the farm dossier without waiting for the end of the year.' France has stated repeatedly that it wants to clip the Commission's wings and repatriate some elements of trade policy negotiation.

The waning of public support, the failures of national co-operation and the Commission's credibility gap all preoccupy Delors. It is around these three areas - trade, unemployment and social policy - that he is developing his strategy for economic renewal. It is a gamble, a calculated bet that with the promise of a big headline, some new cash and a package of reforms he can pull the 12 together as one again.

Papers are circulating throughout the city, pushed discreetly over office desks, handed over in cafes, and they are all on the same subject: competitiveness. The Commission's Forward Planning Unit, the Social Affairs Directorate, the trade unions, companies, all have their own strategy. The fundamental issue is: how far can the EC maintain open markets in the face of external threat?

There is a fear in Brussels that member states are going to re-nationalise policy, slowly bring control back to their capitals. The rationale is simple: if the Community cannot protect them from the instability of world markets, then they will do it themselves. Something of this kind is already happening in agriculture.

Maastricht began the trend, with opt-outs for Britain and Denmark on monetary policy, for Britain on social policy and for Denmark on defence. As a road map through the years to come, the treaty is 'pretty useless', an official in London said.

Will variable geometry work? This odd phrase means the fragmentation of Community institutions, the scattering of policies through different decision-making bodies. The Community method has always specified that all members proceeded at the same speed and in step.

There are two problems with this fragmentation of policy, linked to economic integration. First, it may not be possible to go further without confronting real obstacles. Enlargement of the Community is next on the agenda, first Sweden, Finland, Norway and Switzerland, then, perhaps, Malta and Cyprus, and then Poland, Hungary, the Czech Republic, Slovakia.

If all these countries keep their national vetoes, if they all belong to different security organisations, if they all keep their own agricultural policies, the meaning of the Community will have been diluted to the point where it hardly means anything. 'We are not just an arm of Gatt,' one official said last week.

Indeed, the EC may start rolling back. The 'bicycle' theory of integration - that if the Community is not going forward then it must go back - is largely discredited. But can the single market operate with a high degree of currency instability? 'These pressures will get worse, not better,' Godemont said. And can hard decisions be made when the rules of commerce are challenged? 'Without strong political will, the rules just cannot be made to work,' said the London banker.

For Britain, a Community dominated by rising national barriers and a division into two camps could be dangerous - fear of a two-speed monetary union has preoccupied British officials since last year.

This is what the EC is really about now: not form, arguments about structure, but content, the policies to restore credibility and stability. The debates in Parliament over the past year look antique from Brussel, at odds with what is really going on. To give him credit, Major has been saying just that; that the Community must now move on to more substantive issues, to Eastern Europe, Gatt, jobs. But as one EC official asked anxiously on Friday: 'Does anybody listen to him any more, even in Britain?'

(Graph omitted)

News
peopleHowards' Way actress, and former mistress of Jeffrey Archer, was 60
Sport
Romelu Lukaku puts pen to paper
sport
News
Robyn Lawley
people
Arts and Entertainment
Unhappy days: Resistance spy turned Nobel prize winner Samuel Beckett
books
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
people
Life and Style
Troy Baker and Ashley Johnson voice the show’s heroes
gamingOnce stilted and melodramatic, Hollywood is giving acting in video games a makeover
News
i100
Life and Style
Phones will be able to monitor your health, from blood pressure to heart rate, and even book a doctor’s appointment for you
techCould our smartphones soon be diagnosing diseases via Health Kit and Google Fit?
News
people
Extras
indybest
Travel
Ryan taming: the Celtic Tiger carrier has been trying to improve its image
travelRyanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?
Sport
Usain Bolt confirms he will run in both the heats and the finals of the men's relay at the Commonwealth Games
commonwealth games
Life and Style
Slim pickings: Spanx premium denim collection
fashionBillionaire founder of Spanx launches range of jeans that offers 'thigh-trimming construction'
News
Sabina Altynbekova has said she wants to be famous for playing volleyball, not her looks
people
News
i100
Life and Style
tech'World's first man-made leaves' could use photosynthesis to help astronauts breathe
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

SAP Project Manager

competitive: Progressive Recruitment: SAP PROJECT MANAGER - 3 MONTHS - BERKSHI...

SAP Project Manager

competitive: Progressive Recruitment: SAP PROJECT MANAGER - 3 MONTHS - BERKSHI...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Microsoft Dynamics AX Functional Consultant

£65000 - £75000 per annum + benefits: Progressive Recruitment: A rare opportun...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star