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Federal Europe still on track

May 30th, 1998

A letter to the Daily Telegraph which was published on 30th May 1998.

Sir Leon Brittan may believe that, as he told a recent Tory Party fringe conference, “no-one in Europe wants a Federal Europe”, but this sentiment has to be set against what British politicians have said, and what has actually happened.

For instance – Sir Harold Wilson: “There was a threat of monetary union, and that has now been removed” (1975 Referendum leaflet); Mr Selwyn Gummer: Monetary Union “is not on the agenda” (Today Programme 1995); Mr Kenneth Clark (Today Programme 1996) brushed aside the issue of the transfer of Britain’s gold and foreign currency reserves to the European Central Bank in Frankfurt, when this is explicitly required by the Maastricht Treaty protocol (articles 30 and 42).

Most British people prefer to judge by what influential Continentals say about the EMU project, which is after all their baby – Hans Tietmeyer (Governor of Germany’s Bundesbank): “A European currency will lead to member-states transferring their sovereignty over financial and wages policy as well as financial affairs.  It is an illusion to think that states can hold on to their autonomy over taxation affairs”; Karl Lammers (Chancellor Kohl’s spokesman): “EMU is the central part of the project for European unification”; the Vice-President of the Bundesbank: “of course a country which merges its currency completely cannot remain independent politically” (Today Programme 1990).

As for currency stability, Sir Leon talks parochially as if European parities were the only ones that mattered.  Had we stayed in the ERM after 1992, the pound would have gone almost to two US dollars, a rate which would have bankrupted many British companies, such as Rolls Royce Aero Engines, with export sales priced in dollars.  Over the last four years, the German mark and the other currencies have devalued against the dollar by around 16%, helping their current economic recovery, while the pound has remained essentially stable against the dollar.  Currency parities are ultimately indicators of economies’ trading strengths.  Attempts to remove these indicators for all time are as vain, and dangerous, as removing a pressure gauge from a boiler.