LETTERS: Maastricht mistakes can be corrected

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The Independent Online
From Sir Fred Catherwood

Sir: Andrew Marr ("Dreams broken on the streets of Paris", 12 December) is quite right to warn us that, after 50 years of growing European unity, we are at a dangerous turning point. But the reason is not the power of the global economy.

The Maastricht treaty is intended to protect us against the shock waves of the global economy by giving us a currency that would be strong enough to stand up to anything thrown against it, stronger and with a far wider base than the dollar and the yen, and much more easily tradeable than the mark. It would lower interest rates, abolish costly currency conversion within the EU's huge market and win the fight against inflation. Nothing the matter with all that!

The first political mistake was that, unlike the single market, which emerged with strong and widespread popular support from the elected European Parliament, it came from behind the closed doors of the European Council and was seen as the creature of bankers and bureaucrats.

The second political mistake was that the powerful central bank, fully staffed, operating directly in the markets, was not matched with a corresponding increase in the power of the European Parliament, to which it was to be publicly accountable. Chancellor Kohl had made this a sticking point, which he only gave up at the very last moment.

The technical mistake was that, despite its seven-year timetable, it allowed no interim safeguard against the vulnerability of the European Monetary System from the new free movement of currency and larger trade deficits from the freer markets. Twelve countries were left to defend 12 separate exchange rates out of 12 separate currency reserves, and a country could wake up to find that it had lost half of its currency reserves before breakfast. Black Wednesday was a foreseeable disaster which monetary union, when it came, was intended to prevent. Perversely, it took the blame.

The economic mistake was that the new monetary power of the central bank was not matched by a corresponding body which could concert the economic strategy of the member states. So, unlike the single market, it was not seen as a means to create jobs through economic expansion.

All these faults can be put right. The alternative is either the competitive devaluations and trade barriers of the Thirties, or that we are ruled by the Bundesbank.

Yours sincerely,

Fred Catherwood



12 December

The writer was vice-president of the European Parliament, 1989-1991.