Euro vision

1st October 2004 at 01:00
After years of membership, our distrust and misunderstanding of the EUis as strong as ever. But, as Reva Klein reports, there's more to Europe than bureaucrats in Brussels

Victor Hugo, the great French novelist, was also a visionary campaigner for political and social reform. At the 1851 International Peace Congress in Paris, he spoke of a future in which a United States of Europe would bring peace and prosperity to the continent. He wasn't the first or the last to have such a dream. Various real and would-be emperors - Charlemagne, the Ottomans, Napoleon and Hitler among them - have tried with varying degrees of success to bring the disparate, fractious peoples of Europe together, albeit not exactly voluntarily.

Hugo's rather more benign vision has been realised, in part, with the creation of the European Union. With it has come peace, economic co-operation and prosperity among its member states and freedom of its citizens to move across borders.

But the EU has also spawned an intense distrust of the byzantine Brussels bureaucracy that drives it. It has banished for many the romantic images once conjured by the mere suggestion of Europe in the public imagination, replacing it with one of faceless grey bureaucrats sitting in a big concrete box, constructing a world of mindless uniformity and irrational regulations in which bent bananas are banned in favour of straight ones, and Waterloo Station and Trafalgar Square are renamed to avoid offence to our French partners. While these are myths and distortions promoted by the anti-Europe tabloids, it doesn't stop us from wanting to believe them. Such is the pervasiveness of the eurosceptical press and its constant stream of stories of hare-brained rules designed to take all the fun out of living and all the Britishness out of Britain.

The misconceptions that have surrounded the European Union since its birth 47 years ago and Britain joining it in 1973 have succeeded in creating a haze around what the EU is, what it is becoming, what monetary union and the constitution are about and what Britain has to gain and lose by being a part of Europe. Let's look at the facts.

What exactly is the European Union?

Its roots were in reconciliation, originally between France and West Germany in 1950, after two monumental and devastating wars against each other in the first half of the 20th century. But the European Coal and Steel Community, an early precursor to the EU, wasn't forged in peace and love so much as in distrust. With post-war Germany's industrial revival nothing short of phenomenal, France and other countries felt that they needed to monitor their ambitious neighbour closely and prevent it from becoming too powerful again. So the ECSC was formed, comprised of France, West Germany, Italy, Luxembourg, Belgium and the Netherlands. It allowed for free trade in iron, steel and other materials within the group and set import and export duties and controls - or quotas - on production for these goods. In 1957, the European Economic Community came into being with the Treaties of Rome, which abolished import duties and quotas mainly on agricultural produce from France and industrial goods from Germany traded between the member states. Political differences that existed between them were put aside in recognition of this mutually beneficial arrangement. Ten years after its formation, a commission, council of ministers and European parliament were created. In 1992, the Single European Market was completed, ending all customs tariffs within it. That same year, the Treaty of Maastricht formalised inter-governmental co-operation between the member states on issues such as defence, justice and home affairs. It was this treaty that ushered in today's European Union.

While it was roundly seen as A Good Thing in its tearing down of trade barriers, ensuring minimum levels of production and improving the lot of farmers, in other senses the European agriculture policy was considered a disaster for the UK. Where we had previously imported cheap food from the colonies, costs were now higher. The implementation of the common agricultural policy (CAP) gobbles up half the EU's annual budget. But what really gave Europe a bad press were policies that led, in the 1980s, to massive levels of overproduction, resulting in "butter mountains" and "milk lakes". These were the result of grants and subsidies put in place to regulate farm prices. However, reforms have since been introduced those days to control subsidies, rising costs and gluts.

Through its various permutations, the EU has grown steadily over the years, presently numbering 25 since the 10 new accession states, mainly from the former Eastern bloc, joined last May. Others wait in the wings, eager for entry into what has become the biggest free trade area in the world, with 450 million citizens. Not bad for something that started life as a small act of reconciliation between two former enemies.

Britain's tepid relationship with Europe

The UK's role in this story is a not a straightforward one. Although it was invited to join the EEC in the run-up to the 1957 Treaties of Rome, Harold Macmillan's government wasn't as keen on the political implications of European integration as he was on the economic benefits of free trade between countries. Britain wasn't alone in this: other countries unwilling to rush into the seductive bosom of the EEC included the Scandinavian countries, Portugal, Switzerland and Austria. Instead, they formed a relatively pallid union called the European Free Trade Association, whose benefits and shelf-life were limited but which stood well clear of Franco-German federalism in the EEC during the Cold War years.

But there was another factor at work in Britain's view of the EEC, which was its important trade networks with the United States and former colonies, including Australia, New Zealand and Canada, all of which meant very cheap food. Cutting those ties meant an end to these beautiful relationships and political consequences for Britain.

Still, from the outside looking in, the EEC began looking very good economically. Britain reassessed the pros and cons and decided to negotiate for membership in 1961. Humiliatingly, it was turned down not once but twice by Charles de Gaulle's dissenting vote, mainly due to the UK's close economic and political ties with the US. With a prescience that is striking today in the aftermath of the war in Iraq, and obvious then, in the era of Gallic chauvinism, de Gaulle feared that the UK and US's special relationship would dilute political and economic loyalties to the Union, which at the time was dominated by France. So it was that it took a decade and many negotiations until Britain, along with Ireland and Denmark, were admitted to what was the European Community. For its efforts, it had to enter on "expensive" terms, contributing vast sums of money for membership.

But they all didn't live happily ever after, of course.

Extensions of the EU were opposed by France and Italy in the 1980s and, oddly, Britain negotiated with its partners against America, several times bringing the EU and the US to the brink of trade war. In more recent years, two of the stickiest sticking points have been monetary union and the constitution.

The UK's problem with the single currency

The euro is now used in 12 of the 25 member states and, notwithstanding some short-lived ups and downs, has been a boon for all their economies (except for Germany, which entered at the wrong exchange rate), as well as making it easier for its citizenstomove betweencountries within the Union.

Entering the eurozone (those countries who have taken up the euro) has made those countries their own domestic market. Among other things, this means that trading between countries is free of currency transfer charges and is exempt from the vagaries of changing interest rates. Member countries' trade with each other has risen from 12 to 19 per cent in three years and is forecast to increase by between 40 and 50 per cent over the next 30 years. For those who have stayed outside the eurozone - the UK, Denmark and Sweden - trade has slowed down, though some experts say this would have happened anyway. Even so, nearly 60 per cent of Britain's trade is with the EU and more than three million British jobs depend on it.

Which all begs the question of why, if the advantages are so compelling, the UK isn't clamouring to give up the pound and go with the euro. The fact is monetary union is the fiercest debated issue of all issues associated with Britain's membership in the EU, on both economic and on political grounds. It has emerged as the very heart of our uneasy relationship to Europe, polarising the country and creating the oddest political bedfellows we've seen for a long time: eurosceptics are to be found among elements of both the far right and the far left, the UK Independence Party, Labour, Conservatives and Liberal Democrats. Many fear that in the new, expanded Europe, the European Central Bank (see box opposite) would not be taking the relatively strong position of the UK's economy into account, and that would work against its interests.

But at the core of Britain's reluctance to enter the eurozone is the belief that its economic cycle is linked to the US, rather than Europe. Watch the international stock market movements and you understand just how tight those links are. When Wall Street figures peak or dip, so do the FTSE's, while the French and German stock markets don't affect Britain. There are other factors, too. One is the enduring memory of John Major's government in the late 1980s using enormous amounts of money under the European Monetary System in order to shore up the pound, which impacted heavily on the economy. Another is that with its interest rates on mortgages subject to change here, the UK prefers to control its own rates rather than hand it to a European body.

So hot are the passions surrounding the euro that Labour pledged, after the general election in 2001, to hold a referendum to decide whether Britain should adopt the single European currency or remain outside it. But the Tony Blair made it clear that the referendum would be held only if and when the conditions were right in the Treasury's view. This remains the case.

There are political considerations holding the Government back, too. With another election looming, there is a reluctance to usher in a controversial referendum before then. It would take a massive PR campaign to win over the legions of eurosceptics of all political persuasions who hold that being pro-European means being anti-British. Labour is determined to build, in the Prime Minister's words, "a strong, pro-European consensus again in Britain and to do so, not as a rejection of Britain in favour of Europe, but on the contrary as the proper and modern expression of the true British national interest." But it won't be easy.

The European constitution

According to recent polls, more than two to one of British voters in a referendum would reject the constitutional treaty that was agreed by the 25 EU nations in June. But when asked what the constitution actually said, YouGov pollsters found that people's understanding of it was sketchy, if not downright wrong. They believed that it forces the UK to abolish the pound and take on the euro; that Britain no longer had control over its taxation policies; that it could veto any member state from going to war; that the UK's position on the UN security council would be replaced by a European representative. It does, in fact, none of these things.

Contrary to scare stories in the British press about how the constitution will remove national sovereignty and eurocratise us all, the constitution is a reforming document that attempts to cure the ills of a bureaucracy-laden past and give more autonomy to member states. Here are some of the main points: * For the first time, national parliaments will have a vote in European legislation lInstitutional reforms will modernise and de-bureaucratise the workings of the EU: a full-time chair for the European Council, a reformed European Commission and a strengthened European Parliament lA reaffirmation that the Union is not a centralised superstate but a group of member states who have ultimate control over it lSafeguards to ensure that member states keep their own responsibilities in areas where they wish to lUnanimity is required on fundamental issues of national sovereignty including: accession of new member states, foreign policy, defence, tax, social security, key areas of criminal law and EU resourcing * Trade issues will continue to be decided by the EU

* Currency policy will be decided by the EU

* Creation of an EU president and foreign minister selected by the Council

* A new jurisdiction over common foreign and security policy, in which national vetoes would apply.

So if the constitution isn't paving the foundations for a European superstate in which national sovereignty is superseded and if the euro isn't going to take the currently mighty wind out of the British economy's sails, do the eurosceptics have a point in any of their criticisms? What, to paraphrase Monty Python, has Europe ever done for us?

When it comes to the EU, it is clear the myths and scare stories are more vivid and memorable than the dull, pragmatic truth. There are no soundbytes in the fact that the new constitution upholds member states' national interests within the Union's democratic structures and that Britain has been at the forefront of ensuring flexibility and sovereignty within the Union. The EU is no United States of Europe, but neither is it a flock of sheep being told what to do by a bunch of besuited Brussels bureaucrats.

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