CITY AND SUBURBAN
All aboard the economic slowcoach to ever closer union
CHRISTOPHER FILDES Mr Major (Huntingdon): Madam Speaker, this great debate is now at the point of decision. In a sense the debate has continued ever since I signed my name to the treaty 20 months ago. That is as it should be, for the issues are momentous, and even now I have something to add which may give the House pause.
Most of all, in those 20 months, Europe has changed. Its ministers came to Maas- tricht on the crest of a wave which, so they believed, would sweep them towards mone- tary union. I as Chancellor had taken the pound into the exchange rate mechanism. Every other European currency had been fixed within it for five years. To the true believer it was all as Jacques Delors had prophesied. The first stage of monetary union, which was the ERM, was about to evolve into the second stage, when Europe's exchange rates would be fixed for ever. From that, union — the third, last and beatific stage — would follow.
My colleagues and I did our best. We were told on all sides that the bus was leav- ing for union. It would have been useless to lie down in front of it — we would have been run over. Instead we put spokes in its wheels, excluding ourselves from the social chapter, reserving our rights over sterling. The treaty itself would be so much waste paper until all the member states had rati- fied it. Two still have not. The other one is Germany.
We gained time, and in that time the the- ory of monetary evolution has been shown up for what it is: bogus. The ERM was never going to evolve into union. Flexibility — the right to vary exchange rates —had been built into it. Take that away and it does not solidify; it cracks. We ourselves learned that the hard way last September, but I must say I am glad that we did. In Tokyo this month, my Rt Hon. friend the Chancellor was asked to put the pound back in the ERM, to help the others along. That was the best joke of the meeting. He thought of reviving an older joke and saying that we would go in when the time was ripe.
Cheaper money and an exchange rate freed from artificial constraints have car- ried us into recovery. We now have the fastest-growing economy in Europe, which is not saying much. France and Germany are in recession. The French got too close to the Germans and have caught their cold. The European Community as a whole and this, too, stood out at Tokyo — has the worst economic performance in the devel- oped world. Indeed, that performance shows symptons of secular decline, as my Rt Hon. friend has just been reminding a German audience. The mood of confi- dence, so palpable at Maastricht, has evap- orated, and has given way to fears of a world in which Europe can no longer com- pete.
The chairman of a great European indus- trial company chose last month to speak of Europe in crisis. The 1980s, he said, had set his industry looking forward with a confi- dence that was misplaced: 'Pessimism and uncertainty prevail, demand is weak, inter- est rates are high in many parts of Europe, cash flow is inadequate and margins remain under pressure from increasing competition from the Middle East and Asia-Pacific.'
I quote Sir Denys Henderson, who now that he has split Imperial Chemical Industries down the middle — I must hope to describe as the chairman of two great companies. I wish I could set his fears to rest, but I cannot expect to assuage him with promises of monetary union. He must be glad not to have to contend with last year's interest rates and last year's exchange rate. His opposite numbers in France have not been so lucky.
Looking ahead, he can see that the treaty will .require huge economic distortions, as Europe's economies are forced to fit the pattern set by exchange rates which would be fixed in advance. The plan relies on cross-subsidies, like the Common Agricul- tural Policy but on a larger scale. Sir Denys would rather wait until we are all feeling better. 'The single European market', he says, 'must be given priority over attempts to achieve political and monetary union, which should be suspended for the time being.'
Some assume that this has happened already. They argue that the process, or at any rate the timetable, no longer looks real- istic. They note that by the tests laid down, only Luxembourg now qualifies for union. They see what has happened and is hap- pening to Europe's exchange rates, and they have my Rt Hon. friend's promise that in the lifetime of this Parliament, the pound will not rejoin the ERM. It is true that his predecessor promised that the pound would never leave it, but, as he had the brass neck to tell this House, in a fixed- rate system ministers must say such things.
I, though, would not wish to come here and commend the treaty on a basis of: Don't worry, it may never happen. That would be unworthy. It would also underes- timate the political and bureaucratic forces now at work. A committee has already set- tled down to commission designs for the common European banknote. As for the bank that might issue it, this is a plum to be picked, though I can say from experience that giving a home to a Euro-bank can be expensive.
Euro-institutions bring jobs for the boys. The central bank's directors will be appointed for eight years and take orders from no-one. No wonder that such boon- doggles as the European monetary commit- tee and the central bankers' committee carry on regardless. They can point to the treaty, and make the familiar excuse that they are obeying orders.
Ministers, can make no such excuses. We all put our names to it. I certainly make no excuse for our parliamentary process or for the time it has taken. In that time, Europe's problems have become more urgent, and union less so. The chairman of ICI seems to be of that opinion. So, I dare say, is the Bundesbank. Even the Banque de France, which used to be so deft at devaluation on the sly, may not have lost its cunning. Per- haps it will adapt Voltaire, and tell us that if Maastricht did not exist, we should be in no hurry to invent it.
That, though, is hypothesis. For myself, my word and the Government's word are pledged. I must therefore tell the House that we shall ratify the treaty — [uproar] when the time is ripe. Alternatively, when Chelsea win the cup. That should be a great relief to everyone, and I commend it to the House.
The Spectator goes to press before the Maas- tricht debate. I record my version of the Prime Minister's speech on the principle laid down by Lord Curzon — that the journalist's art is the intelligent anticipation of facts before they occur. This time, though, I wouldn't bet on it.
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