this fear, of course, was the mobilizing theme of the campaign against ratification of Maastricht in the French referendum a few months later. The French electorate split down the middle on the issue of whether a single currency would reduce or enhance the power of the strongest nation-state on the continent. The majority of the political elite, led by Mitterrand and Giscard, in effect argued that the only way to neutralize German predominance was monetary union. Their opponents, led by Séguin and De Villiers, retorted that this was the surest way to bring it about. The dispute was fought out against the background of the first monetary tempest set off by the raising of the German discount rate in June, which ejected the lira and the pound from the Exchange Rate Mechanism in the final week of the campaign. A year later it was the turn of the franc to capsize in waves of speculation whipped to storm-height by the line of the Bundesbank.
We now have a vivid inside account of these events in Bernard Connolly’s book The Rotten Heart of Europe. The coarseness of its title and cover is misleading: a sign more of the self-conscious encanaillement of smart publishing than of authorial quality. The book suffers from an occasional lapse of taste, and liking for melodrama. But for the most part it is a highly literate and professional study. Indeed, piquantly so. A crypto-Thatcherite at the highest levels of the Community’s financial apparatus in Brussels, Connolly is at the antipodes of Thatcher’s bemusement in the field of European politics. His book displays an unrivalled mastery of the nexus between banking and balloting in virtually every member-state of the EC: not just France, Germany, Italy or the UK, but also Belgium, Denmark, Portugal and Ireland are covered with dash and detail. (The only significant exception is the Netherlands, whose ambivalence between liberal economics and federal politics is consigned to an exasperated footnote). Chauvinist convictions have produced a cosmopolitan tour de force.
Connolly’s standpoint is based on a principled hostility, not merely to a single currency, but to fixed exchange rates between different currencies—in his eyes, a dangerous and futile attempt to bridle the operation of financial markets, which can only stifle the economic freedom on which the vitality of a disorderly economic system depends. ‘Western capitalism contained is Western capitalism destroyed’, as he pithily puts it.37 Describing the dogfights of 1992–3 inside the ERM, his sympathies are with the most adamant German opponents of concessions to their neighbours’ concerns over interest rates, above all the crusty figure of Helmut Schlesinger, then chairman of the Bundesbank. But the sympathy is strictly tactical—Schlesinger is applauded for an intransigence whose effect was to undermine any prospect of stability in the ERM, so exposing in advance the unviability of EMU. It involves no idealization of the Bundesbank, the myth of whose ‘independence’ of political influence Connolly punctures effectively—its policies corresponding with remarkable regularity to the needs of the CDU/CSU in the electoral arena.
Today the German political class, in which nationalist reflexes are no longer so dormant, is having second thoughts about monetary union, as the prospect of a single currency has come to look ambiguous on the other side of the Rhine too. Could it be that Germany received shadow rather than substance in the bargain at Maastricht? In chorus, Waigel for the ruling coalition and Tietmeyer for the central bank have been upping the ante for monetary union, with stentorian demands for ‘strict compliance’ with the convergence criteria appended to the Treaty (public debt no higher than 60 per cent and public deficit no more than 3 per cent of GDP, inflation within 1.5 and interest rates 2 per cent of the three best performers in the Union) and a ‘Stability Pact’ beyond them. This orchestrated clamour has no legal basis, since in the text signed at Maastricht the convergence criteria are not unconditional targets to be met, but ‘reference values’ to be moved towards; and whether or not sufficient movement has been achieved is for the Commission alone—not the Federal Republic or any other government—to decide. These provisions were the work of Philippe Maystadt, foreign minister of Belgium, a country with good reason to insist on flexibility, and certain memories. In its disregard for legal niceties, or small neighbours, the tone of current German diplomacy has become increasingly Wilhelmine.
Nevertheless, it is a striking fact that so far this ‘Teutonic tirading’, as Adorno once called it, has met no rebuff. Paris, far from reacting, has been eager to accommodate. For Connolly, this is only to be expected. Under Mitterrand, the attitude of the French elite has been a Vichy-like subservience to German economic power. In its pursuit of a franc fort requiring punitive interest rates to maintain alignment with the D-mark at the cost of massive unemployment, this establishment has committed treachery against the French people. Noting the widespread alienation from the political class evident in every recent poll, and recalling with relish the country’s long traditions of popular unrest, Connolly—who describes himself as a Tory radical—looks forward with grim satisfaction to the explosion of another revolution in France, when the population becomes aware of the price it is paying for monetary union, and rises up to destroy the oligarchy that sought to impose it.38
Premonitions of this kind are no longer regarded as entirely far-fetched in France itself. For the moment the prospect is less dramatic, but still fraught enough. The Maastricht referendum revealed the depth of the division in French opinion over the likely consequences of a single currency—would it lead, in the stock question, to a Europeanized Germany or to a German Europe? The victory of Jacques Chirac in the subsequent presidential elections guarantees that the tension between antithetical calculations will continue to haunt the Elysée. For no French politician has so constantly oscillated from one position to the other, or so opportunely reflected the divided mind of the electorate itself. Clambering to power on a platform challenging the bipartisan consensus of the Rocard-Balladur years, la pensée unique that gave higher priority to a strong franc than to job creation, after a few mis-starts Chirac in office has reverted frantically to financial orthodoxy again. The Juppé government is now administering even tougher doses of retrenchment to force the deficit down to Maastricht levels.
Yet even the tightest budgetary rectitude is no guarantee of a franc fort. The ‘convergence criteria’, as Connolly rightly insists, are completely unrealistic in their exclusion of growth and employment from the indices of a sound economy. Designed to reassure financial markets, they satisfy only central bankers. The markets themselves are not mocked, and will sooner or later mark down any currency where there is widespread unemployment and social tension, no matter how stable are prices or balanced are public accounts—as the French Treasury discovered in the summer of 1993. The current domestic course of the Chirac regime can only tighten already explosive pressures in the big cities at the cost of its electoral credibility, on which that of its exchange rate also depends. The massive street protests of late November could be a harbinger of worse trouble to come. The regime’s slump in the opinion polls is without precedent in the Fifth Republic. An image of zealous compliance with directives from the Bundesbank involves high political risks.
Chirac’s resumption of nuclear tests can be seen as a clumsy attempt to compensate for economic weakness by military display—demonstratively flexing the one strategic asset the French still possess that the Germans do not. The result has been merely to focus international opprobrium on France. Partial or hypocritical though much of this reaction has been (how many pasquinades have been written against the Israeli bomb?), Chirac’s experiments remain pointless. Forcible-feeble in the style of the man, they can scarcely affect the political balance of Europe, where nuclear weapons are no longer of the same importance. At a moment when French diplomacy ought to have been engaged in winning allies to resist German attempts to harden the Treaty of Maastricht, for which France’s immediate neighbours Italy, Belgium and Spain were more than ready, it was gratuitously incurring a hostile isolation. On present performance, Chirac could prove the most erratic and futile French politician since Boulanger.
Nevertheless, contrary to received opinion, in the end it will be France rather than Germany that decides the fate of monetary union. The self-confidence of the political class in the Federal Republic, although swelling, is still quite brittle. A cooler and tougher French regime, capable of public historical reminders, could prick its bluster without difficulty. Germany cannot back out of Maastricht, only try to bend it. France
