23.10.1997

Blair stumbles over Europe

As a result of trying to face both ways over European Monetary Union, the government has suffered its first major setback

The differences over the timing of Britain’s membership of a common European currency came to a head last weekend.

The government’s control over events in relation to European integration has been shown to be sadly lacking. This has unsettled not only its media relations, but, more importantly, the capitalist economy itself, as seen by the fall on the stock exchange.

The confusion began with an article in the Financial Times on September 26, which stated that the cabinet was likely to opt for “early” entry into a single currency. The government line - that it was “extremely unlikely” that Britain would join the ‘first wave’ of 10 or 11 countries to adopt the euro as an official currency - was confirmed by the report, putting Britain alongside Sweden, Denmark and Greece (and perhaps Italy) as initial non-participants.

But the implication carried in the article was that membership would follow quickly afterwards. This seemed to be confirmed by a story in the Daily Mail (October 13), which claimed that the government would use the occasion of the November 21 European summit to announce that Britain would join “as soon as possible” after the euro’s 1999 launch.

However, the spin doctors were starting to put out contradictory messages, with Downing Street continuing to push a more cautious line than treasury sources. This led The Independent to speculate about a “damaging rift” between Tony Blair and chancellor Gordon Brown (October 14). Finally Brown gave an interview to The Times in which he stated: “If we do not join in 1999, our task will then be to deliver a period of sustainable growth, tackle long-term weaknesses in the UK economy and to continue to press for reform in Europe” (October 18). This gave the impression of a much longer haul, reinforced by the headline under which the interview was carried, “Brown rules out single currency for lifetime of this parliament”.

The chancellor had not made that specific commitment, but treasury spin doctors were busy advising reporters that such a conclusion could be implied from Brown’s remarks.

The original Financial Times report had been warmly received in the City, with a leap in share prices and a parallel fall in the value of the pound, making it easier for big British capital to sell abroad. It was clear that all the most influential sections of British capital - the financial institutions as well as the major transnationals - are in favour of early British participation in a single currency as part of a deepening European integration.

This was reflected in the findings of a poll announced earlier this week, that the proportion of businesses in favour of British membership has risen to two-thirds from just over a half a year ago. Many small businesses are now in favour. And retailers are already taking practical action to prepare for Emu. Marks and Spencer is the first company to announce that it will accept the euro in all its outlets from 1999, whether or not Britain is part of the launch. With the backing of the London Chamber of Commerce most other major retailers are making similar preparations.

However, the government has another constituency - it must also ensure that the bulk of the population can be carried with it. Yet the latest Mori poll shows that only 27% support monetary union with 54% opposed. While it wants to encourage the belief in the City that it is moving in the right (pro-Emu) direction, the government also needs to keep in step with the chauvinistic sentiments that are at the heart of official state ideology. It needs to persuade public opinion that it is defending ‘vital British interests’.

This political consideration at present conflicts with the overriding economic requirements of British capital. Some commentators believe Blair needs to win over such organs as the ultra-chauvinistic Sun. According to The Independent, “Mr Murdoch’s acquiescence would be needed before the prime minister even thought of putting the single currency issue to a referendum of the electorate, as promised in the May manifesto” (October 14). This may be an exaggeration, but it bears witness to the important influence of the populist mass media nevertheless.

The shift in official government policy towards a marginally more Eurosceptic line can be measured in millimetres. But the change has been magnified a thousand times by the spin doctors and the reaction to their briefings. The policy since the election has always been that Britain would be most likely to join the single currency within a few years of the introduction of the euro. Whereas the Financial Times “early entry” report would suggest membership in around 2001 or 2002, the logic of ‘not before the next election’ shifts the balance towards 2004 or 2005. Assuming The Times October 18 headline to be an accurate reading of the government’s position, British membership would not be possible by 2002 when Euro notes and coins are to be introduced - unless of course Labour opted for an early general election.

Despite that, the adverse effect of Brown’s interview on the stock exchange was in inverse proportion to the reaction to the FT article. Shares slumped and sterling rose.

However, there is, as The Independent put it, an “inexorable movement” (political as well as economic) towards acceptance of the euro (October 20). Its appearance in shopping centres across the country would add to the impetus towards its recognition as legal tender. The government would be able to portray entry into Emu as bowing not only to the wishes of business, but also to the practical needs of the population. Much better than being seen as foisting an unpopular change on an unwilling electorate.

New Labour is for the moment a more useful and reliable instrument of the bourgeoisie than the Tories, who remain riven with differences over the central question of the European Union. A majority of Conservatives, including perhaps its leaders, remain opposed to monetary union under any circumstances, whereas the Labour leaders agree that there is no other satisfactory course for British capital.

But the events of the past few weeks show that no government is immune to the contradictory political and economic pressures and difficulties that will inevitably accompany the process of capitalist European integration. Attempts to ride out these difficulties and reconcile conflicting interests by putting out different messages according to the audience could never continue indefinitely, no matter how skilful the spin doctors. For example, the government must be seen by European bourgeois leaders as having at least a modicum of enthusiasm for the Emu project at a time when Britain is about to take over the EU presidency. Such an image does not lie easily alongside impressions of a long delay before membership.

The transition to Emu is bound to give Blair difficulties. For example, the treasury has estimated that joining in 1999 would cost £20 billion - the equivalent of raising income tax by 10p in the pound. Such measures, or the implementation of similarly unpalatable policies with their inevitable effect on Labour’s popularity, are simply being postponed - under the guise of waiting for the right conditions.

Brown has laid down five guidelines to ‘test’ these conditions. They are: the likely effect on jobs, investment and the financial service industry; the ‘flexibility’ of the economies of other Emu members; and the extent of the convergence of Britain’s business cycle with those of the EU as a whole.

This is part of an elaborate sham of ‘defending our interests’. You could wait for ever for such conditions to be satisfied. Surely the whole purpose of European integration, including monetary union, is to put capitalist industry and investment on a firmer, more stable basis by attempting to aid economic convergence. It could never completely succeed, because capitalism, by its very nature, develops unevenly. Even within the most advanced capitalist countries there exists considerable internal unevenness. Monetary policies aimed at stimulating the backward areas always risk overheating the economy as a whole. Global measures deemed appropriate for one region will always be likely to harm another. It is even more farcical to claim to be waiting for spontaneous convergence.

The transition to integration is bound to be fraught with difficulties and high risks for the ruling class, irrespective of its timing and speed. But the difficulties of the European bourgeoisie can give rise to new opportunities for the European working class. It is up to us to forge a movement across the continent to take advantage of those opportunities.

To the extent the EU begins to take state form, so must workers organise across European borders. We need to create international trade union structures and - centrally - aim to build a Communist Party of the EU.

Only in this way can the bosses’ plans be thwarted, opening the way for a Europe of the working class.

Alan Fox