POHL ASSURANCE
It would be nice to imagine that while the president of the Bundesbank was jour- neying towards Munich, suddenly there shone round about him a light from heaven, and he fell to the earth from his Mercedes, and heard Mrs Thatcher's voice saying unto him, `Peohl, POhl, why perse- cutest thou me?'
Perhaps it was not quite like that. But the change in Herr POhl's attitude to European monetary union has been dramatic nonetheless. Less than three months ago, when he spoke in London, he indulged in a pantomime display of sup- pressed mirth at the British Government's reluctance to rush towards monetary un- ion. Last week, in Munich, he said he had 'some sympathy' for the British approach, and argued that to impose monetary union on countries with different levels of econo- mic performance would be disruptive, ex- pensive and politically damaging.
All this came as a blessed relief in Downing Street; and at the Treasury it was cheered to the ecu. But the one person with the greatest amount of wry gratitude for Herr Pohl's remarks must have been Mr Nicholas Ridley. For the arguments which the Bundesbank president used were the exact counterparts — from a German point of view — of the arguments express- ed by Mr Ridley in these pages.
The example Mr Ridley gave was that of unemployment at Jarrow in the 1930s. He said it would be politically unacceptable (meaning not just unpopular, but wrong) for a British MP to have to go to his constituents there and tell them that their unemployment was caused by a tight Euro- monetary policy which MPs could do no- thing to change. In a remarkable recent interview with Hugo Young of the Guar- dian, Herr Pohl agreed with this view: 'If the European Central Bank System pur- sued a very tough policy, Bundesbank-
style, which led to higher unemployment, you can imagine what pressures the system would come under in different countries'.
The unemployment of Jarrow remains the most potent symbol of economic malaise in the British imagination (particu- larly in the mind of someone who, like Mr Ridley, began his career as an engineer in the shipyards of north-east England). But the equivalent most potent symbol for Germans is not unemployment, but infla- tion — the devastating inflation of Weimar. Anything which weakens the perfectionism of the Bundesbank's anti- inflationary policy will be looked on with suspicion in Germany; and Herr Pohl's speech at Munich voiced for the first time the suspicion which many Germans now feel towards the idea of yielding up control over their own monetary policy. 'Any step towards the communitisation of monetary policy means a loss of manoeuvre for the Bundesbank. Nobody is willing to dispense with his currency.'
To these two objections Herr PON added a third, which was also predicted in
these pages several months ago. According to the Delors plan, any ill effects produced by monetary union in the weaker econo- mies of Europe will be compensated by 'resource allocations', 'regional funds', 'structural plans', and so on — in other words, handouts from the richer countries. These handouts will be co-ordinated (i.e., turned into instruments of central plan- ning) by the Commission; but the amounts involved will be decided by the Council of Ministers, in which the ministers of the richer countries will be out-voted. What this seems to mean, from the Germans' ,point of view, is not only that their anti-inflationary purity will be sullied, but that they will have to dig deep in their pockets. When Herr Pohl referred last week to the heavy expenditure of public funds that would be required by European monetary union, he was offering the first signs that Germany, goaded already by the surprising costs of re-unification, might eventually tire of her role as the uncom- plaining milch-cow of Europe.
The impact of Herr Pohl's words has already been felt. Last weekend's meeting of European finance ministers rejected the Commission's plan to rush into the next stage of monetary union at the earliest opportunity. The British Government should not gloat over its success, however; for the ministers did not reject the princi- ple of monetary union, but simply argued about the technical problems of im- plementing it. It is typical of the topsy- turvy workings of the EEC that the politi- cians should concentrate on the technicali- ties, while the technocrat, Herr Pohl, points out the real political issues.
For decades, the federalists' preferred method in Europe has been to present all
changes as mere technical improvements, and allow the political implications to follow on behind them. This placing of cart
before horse has come to seem the natural state of affairs — as perhaps it is in a situation where horse and cart are travell-
ing out of control, backwards, downhill.
With the approach of the Inter- Governmental Conference on economic
union in December, the gradient steepens. We can only hope that the much-cow will dig in its hooves, before it is too late.
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