The short answer is, not much. The lesson of the currency markets of the past few days is not really that countries which mismanage their finances as badly as Italy have to devalue: it was obvious that a lira devaluation would come sooner or later, and the only issue was the timing. The lesson has been that a non-EC country such as Sweden still felt it had to try to hold its currency's value against the mark, paying the price of very high interest rates to do so. Why? Because if a country does a large amount of its trade with an area, it gives stability to its economy to link its currency to the currency of that area.
So were Britain in the position of Sweden, we would not be particularly concerned about the way the French might vote. We would have to accept the cold logic that whether or not the Maastricht treaty went through, our exchange and interest-rate policies were determined, at least in the short-term, by an alliance between the financial markets and the German Bundesbank. The Bundesbank would be ruling our finances not because we were members of the ERM, but because it is the dominant financial force in the region.
In the longer term, we would be worrying about something much more fundamental: how to justify a high standard of living in a world where our apparent comparative advantage in producing manufactured goods seems to have been slipping. Britons think of Sweden in terms of lavish social security benefits paid for by excellence in engineering and design: Volvos and Ikea. But it has become apparent in the past three or four years that the Swedish miracle has ended. Unemployment has tripled over the past 18 months, competitiveness has deteriorated, and social security benefits are being cut. In relative terms, the deterioration of the Swedish economy has been sharper than ours.
What matters for both countries, or indeed for any Western European economy, is its comparative advantage in producing goods and services. The Gross National Product per head in Western Europe is now roughly the same as that of North America or Japan, but without the former's advantages of scale or natural resources, or the latter's genius at the mass manufacturing of consumer goods. The only justification for our standard of living is that we are cleverer at some forms of economic activity than those regions.
Britain's spheres of excellence are extraordinarily varied. Question - what have these things in common: financial services, whisky, racing cars and popular music? Answer - they are all areas where Britain is the largest exporter in the world. Yet the quantity of words written about these subjects in the press is a tiny fraction of that written about Maastricht.
Finance is a traditional service export; whisky a specialist consumer product; racing cars are craft-based high technology; popular music an arts-based service delivered to a mass market. The British are not like the Japanese: we are good at lots of different things, with no apparent connection between them.
But that is the nature of Europe's special economic place in the world. The various Western European economies are all very different: Germany's largest exporter is the mechanical engineering industry, but France's largest exporter is tourism.
There is no common path to economic success in Europe: culturally and industrially, the various Western European countries are very different. What the EC has done has been to help the countries grow richer by specialising further.
The central element in the Maastricht treaty is the plan for a common currency by the end of the Nineties, which would undoubtedly hasten this process to some extent. France would become an even more attractive holiday destination to other Europeans were there no need to swap pounds or marks for francs, losing a bit on the exchange rate each time. Were the French to vote 'No', the plan would undoubtedly be delayed. But it was probably going to be delayed anyway, for the timetable looked extremely tight given the need to bring the various countries' economies into line with each other.
If the economic pressures are strong enough, Europe will eventually get its common currency, so in practice we are talking about the difference between a common currency in about 2005 or perhaps in 2015.
Failure to ratify Maastricht would only be a serious economic setback were it to reverse the whole process towards closer trade ties which has helped Europe's general economic performance. It won't.
Sure, it matters a bit. But what matters vastly more is the less glamorous, detailed way in which medium-sized economies such as Britain's learn to develop their comparative advantage. Maastricht matters vastly less than the efforts of Volvo and Ikea; or of Warburgs, Distillers, Frank Williams and Sir Andrew Lloyd Webber.Reuse content