French Referendum: The drive towards a closer union: Stories behind the ERM and the Maastricht treaty

ON 28 February 1986 EC states adopt the Single European Act at the Hague. It is the first revision of the founding Treaty of Rome. The 12 members pledge 'to transform relations as a whole among their states into a European Union' and commit themselves to 'the objective of the progressive realisation of economic and monetary union'.

Four months later, in Hanover, Germany, the European summit charges a special committee, headed by Jacques Delors and including central bank governors and leading financial experts, to study ways and means of achieving Economic and Monetary Union (EMU). The Delors report, published on 12 April 1989, envisages economic and monetary union in three stages culminating in a common currency by the year 2000.

The first stage, to be completed by 1 January 1994, includes the free movement of capital and the creation of a European central bank. The second, up to 1 January 1997, envisages the creation of a single European currency for a minimum of seven states, all of which must fulfil the five criteria by which the health of a country's economy is to be judged. In stage three, if fewer than seven states qualify at this point, the arrangement lapses until 1 July 1988, when it takes effect irrespective of how many countries fulfil the criteria. These states must adopt a common currency by 1 January 1999.

Mr Delors tells a meeting of finance ministers in Antibes on 9-10 September 1989 that EMU lays the foundation of an emryonic European political system. On 19 April 1990, Helmut Kohl and Francois Mitterrand jointly call for the political construction of Europe to be accelerated. They propose 1 January 1993 as the target date for political union after ratification by national parliaments. On 28 April, in Dublin, the European Council confirms its commitment to political union.

On 8 October 1990, John Major, as Chancellor of the Exchequer, takes sterling into the European Monetary System (EMS). That October, in Rome, the European Council vows to develop the Community's political dimension. It formally defines EMU and affirms that the final objective is a single currency. Britain refuses to accept this decision. In December two inter-governmental conferences are opened. Sessions to be held virtually every month at ministerial level.

On 19 June 1991 the Luxembourg presidency publishes two draft treaties, one on political the other on economic union. Ten days later the European Council sets general guidelines on political union and proposes three pillars: those aspects already governed by the EC, inter-governmental co- operation on home and judicial affairs, and co-operation on a common foreign and security policy.

In December 1991, in Maastricht, the Treaty on European Union is agreed after the UK secures its exclusion from the social chapter and the long- mooted opt-out from Stage 11 of EMU (the creation of a single currency). On 7 February 1992 the Maastricht treaty is signed. On 2 June, 50.7 per cent of Danes reject the treaty in a referendum. On 3 June Mr Mitterrand announces a French referendum and the next day the EC reaffirms a commitment to ratify by the end of the year.

On 16 July the Bundesbank raises the discount rate. In July and August polls show a majority for a 'no' vote in France, and tension grows in currency markets. On 13 September the first realignment of exchange rate mechanism (ERM) occurs since 1987 as the lira is devalued. The next day the Bundesbank cuts rates but by less than expected, and the weakest ERM currencies come under attack. On 16 September sterling, lira and peseta fall below their ERM base. Britain raises interest rates by five points but cannot stop the run on sterling and finally suspends EMS membership. The rate hike is reversed.

On 17 September the EC monetary committee temporarily suspends the lira from the ERM. The peseta is devalued by 5 per cent. The weaker currencies are still under pressure.