THE ECONOMY
Under the volcano Mrs Thatcher erupts at the EEC summit
JOCK BRUCE-GARDYNE
Krakatoa has nothing on it'. Thus the Times creatively misreported Mr Ber- nard Ingham on the Prime Minister's reac- tion to last weekend's Milan summit. It is greatly to be feared that her summit colleagues were not the only ones to be covered in volcanic ash. Sir Geoffrey Howe and his Foreign Office mandarins Will also be needing to send their Summit suits to the cleaners. For months before- hand we were regaled with accounts of how our ingenious diplomats, the miseries of five years' wrangling over 'our money' safely behind them, had seized the oppor- tunity presented by the German veto on a tiny shaving off the price to be paid to the barley barons to hijack the European initiative. The machiavellian French might fret and fume at the prospect. Milan was to be Mrs Thatcher's summit.
Instead of which our Prime Minster emerged looking like one of those ladies at Wimbledon who has carefully positioned herself for a drive from the forehand Corner, only to watch the ball skidding down the backhand tramline. The French and Germans had coolly stolen the British plans to dismantle outstanding internal market barriers from under her nose, and tacked on to them the proposal to abolish national vetoes altogether, which was pre- cisely the one our diplomats were supposed to have killed stone dead. Throw in a snap vote and she finds herself in a minority of three with only the Danes and the Club villain, Greece, for company. My! Those smartypants at the Foreign Office are going to have some explaining to do!
The Prime Minister's rage was eminently understandable. The Summit could indeed have mapped out a realistic path to what must now be called 'the land of Cockfield' (after our senior Commissioner in Brus- sels, who has described it for us): a Europe in which not only goods but also services could be swapped without let or hindrance. Instead it chose to embark on another theological disputation about national sovereignty which could be as exhausting and profitless as previous disputations ab- out the budget. And it is hard to resist the suspicion that the desire to teach 'Madame Thatcher' a lesson was at least as powerful
a motive as any genuine federalist convic- tion.
_ Yet the unnamed Foreign Minister who predicted that 'if we can only get her to the trough, she will drink' could turn out to be right in the end. For it is very hard to see our Foreign Office gritting its teeth and getting into bed with such uncongenial companions as the Danes and Greeks for long. Moreover, if we could somehow contrive to overcome our ingrained distrust of our continental partners we might in- deed come to see that it is we who could stand to benefit most from the sweeping away of national vetoes on the abolition of barriers to such items as the trade in financial services.
Maybe the same also goes for British participation in the Euro-currency bloc. The outcome of Milan will only strengthen the Prime Minister's resolve to have no- thing to do with it. Yet increasingly one senses a replay of the argument about whether or not to sign up with the Treaty of Rome in the late Fifties. Legend has it that it was a few visionary politicians — Harold Macmillan and Edward Heath in particular — who dragged a reluctant Civil Service and business community kicking and screaming behind them. Not so. It was the City which was first converted: then a handful of key civil servants, by the City. Harold Macmillan and the politicians were the belated converts.
So it is today. Last month the Federal Trust staged another star-decked beanfeast on the theme that 'The Time is Ripe' for sterling to become a playing member of the European currency system. There were Sir Jeremy Morse and Viscount Davignon, David Howell and Lord Lever, Edmund Dell and Christopher Tugendhat and Roy Jenkins, Ronnie Utiger from the CBI and Anthony Loehnis from the Bank of Eng- land. One and all — with the lone excep- tion of Mr Loehinis, who expressed mea- sured doubts (but then the Bank of Eng- land has enough on its plate just now without having Mr Loehnis joining Mr Coleby in the Chancellor's doghouse for making 'ill-informed comments') — could not wait to join in. Mr Utiger even raised some eyebrows by voting for entry at the current sterling/deutschemark parity and to hell with it — the official CBI line is that we need adjustment to a more 'realistic' (i.e. softer) rate first.
'They're dining in tonight.' But perhaps the most powerful interven- tion came, not from one of the British contributors, but from M. Alain Camu, a Belgian director of Hill Samuel. His theme was that the European Currency Unit (the 'ecu') is the counter of the future, and that if Britain did not take the plunge the City of London would very soon find itself left off the 'tombstones' on which the bankers like to inscribe the names of the lead participants in jumbo loans and suchlike. The thought occurred that the City of London has for years contrived to be the leading player in the Euro-dollar market without actually entering the dollar bloc. No matter. This is precisely the sort of talk to chill the marrow down in EC2.
Now Mrs Thatcher is not remotely like Lord Stockton. No chance for the City to get a word in edgeways as it tucks into its sandwiches between the grouse-drives where she is concerned. Indeed, if its spokesmen try to say their piece in Down- ing Street these days they are more likely to get a piece of her mind in exchange. Yet we should never underestimate the Estab- lishment. If they really get the wind up about Britain 'missing the bus' again, they will not leave a significant mandarin un- wined and dined. Besides, the Treasury has shifted. It still shares the Prime Minis- ter's gut suspicions about the motivations of our neighbours — not to mention those of our own Foreign Office. But it no longer yearns for cheaper interest rates at any price. On the contrary — as the Chancellor made crystal-clear last week when he thumped the CBI's Sir Terence Beckett for demanding interest rate cuts — it now regards dear money and appreciating sterl- ing as the best defence it has against happy-go-lucky wage-bargaining in the pri- vate sector.
Admittedly you can have dear money and appreciating sterling without joining the Euro-currency club (let alone abandon- ing the national veto on EEC decisions).
But when the CBI swells the clamour for a British link-up with the deutschemark — a link-up which would smartly reverse mar- ket pressures for cheaper money at home if the DM continued to climb against the dollar, as it very well might — the tempta- tion to hoist it with its own petard could appeal to Nigel Lawson.
That would still leave the Prime Minister to be converted. But stranger things have happened — as Lord Carrington proved six years ago to the satisfaction of Mr Mugabe. She might indeed 'drink' one day.
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