A Green Critique of the Single Currency

Speech for Anti-Euro Conference, Conway Hall, London

I wanted to outline a Green critique of the Single Currency, and to underline the importance of building a progressive, internationalist case against the Euro.

Because it seems that anyone opposed to the single currency has got to get used to being caricatured as an antediluvian “little Englander”. The assumption is that anyone who is on the same side of the debate as Rupert Murdoch must be reactionary, xenophobic, and “anti-European”.

Well, no, actually, in this instance, that isn’t the case. Although it’s certainly true that opposition to the Euro brings with it some strange and often questionable bed-fellows, it is perfectly possible – and urgent – for progressive internationalists to oppose the single currency. That does not make us anti-European. Far from it. For example, it’s precisely because British Greens have a wider vision about the role of Europe that we are so critical of the narrowly defined economic objectives of the EU, of which European monetary union (EMU) is such a key part.

We believe that the EU must put social and environmental justice at the heart of its domestic and international policies. Now to do that requires the EU to have strong, diverse, self-reliant regional economies. But one of the overriding aims of the single currency is to turn Europe into one giant economic superpower, able to compete more efficiently with the US and Japan. To this end it is increasing economic centralisation and international trade, and. is accelerating the process of economic globalisation.

We therefore oppose EMU and the single currency, not for narrow nationalistic reasons, but because we believe that the economic logic of this dubious experiment is flawed and rides roughshod over our key social and environmental concerns.

A Green critique of EMU is based on our assessment that joining the Euro would prevent Britain from moving beyond conventional economics to the economics of sustainability.

The central aim of Green politics is to create a truly sustainable society; one that meets basic human needs in a way that will allow the natural systems of the planet to continue meeting those needs indefinitely. Now that requires a genuinely equitable distribution of resources, not only amongst the current human population, but also between our own and future generations. It also depends on a truly democratic system of governance where the needs of even the most marginalised are heard and recognised. Only when a full commitment to equity has been established will people be prepared to work together across cultural and political divides to overcome the many challenging obstacles to sustainability.

A commitment to sustainability translates into a clear set of socio-economic priorities and constraints that differ markedly from the consumption-and-growth-at-all-costs assumptions of conventional free-market economics. Decent housing and healthy food must be available to all. High standards of environmental protection should guarantee unpolluted air and water and the opportunity to enjoy access to an unspoilt natural environment. Everyone should be able to find a useful and fulfilling occupation without facing exploitation at work or having to sacrifice contact with family and friends. Redistributive measures should be employed to reduce divisive inequalities, provide a safety net against poverty and ensure a good standard of education and healthcare. Fiscal and regulatory frameworks should systematically favour environmentally benign forms of production and consumption.

From a Green perspective, Britain should only join the single currency if membership would make it easier for us to meet these priorities and constraints.

The Green Party’s view is that it wouldn’t and that Britain will be better able to establish a truly sustainable economy outside the Euro. This conclusion stems from three main features of EMU: the first is the size and diversity of Euroland; the second is the monetary policy of the European Central Bank (ECB); and the third is the undemocratic nature of the EMU project

Each of these aspects reflects the fact the entire EMU project has been moulded to fit the corporate agenda. It suits multinational corporations to have a uniform market with a single currency over as large an area as possible, regardless of the natural diversity of that area. They like nothing better than a rigid monetarist environment with maximum price stability, come what may, enforced by a central bank that is beyond all democratic control. And if this requires a smokescreen of misplaced and almost unquestionable integrationist idealism to dupe the people into accepting it, so be it.

In EMU we are witnessing nothing other than the creation of the European branch of the globalised economy, yet the economics of globalisation are far removed from the economics of sustainability.

I’m sure I hardly need to tell this audience about the overwhelming evidence that economic globalisation is responsible both for growing social inequalities and for unprecedented environmental damage.

And it does this essentially by creating a vicious cycle whereby workers, communities and governments are increasingly forced to compete with one another in a world-wide “race to the bottom” on wages, taxes, environmental protection, and any other factor that might influence investment decisions. International competitiveness is becoming the single most important indicator of a society’s health, inevitably leading to lower social and environmental standards. This, together with the increased exploitation of natural resources and the massive amounts of energy used to shift goods from one end of the world to the other, ensures that corporate-led globalisation is both socially and environmentally unsustainable.

In our analysis, the Single Currency will simply drive this process even faster. Over the past 10 years, EU liberalisation, deregulation and privatisation policies have facilitated the waves of mergers and acquisitions, which have resulted in even greater corporate concentration. EMU, by promoting greater international competitiveness, is likely to encourage this trend yet further. The 1997 record of US $384 billion spent in European mergers – an increase of almost 50 per cent in one year – was exceeded by even higher levels and an unprecedented number of cross-border mergers in 1998. These mergers are instigated by Single Market competition, which grows increasingly more fierce as the remaining barriers to trade are dismantled one by one.[i] And one of the results of this is jobs lost. Indeed some analysts suggest that the new wave of mergers and corporate downsizing in Europe as a result of the single currency could lead to one out of every twenty industrial workers becoming unemployed

At the same time, companies that previously organised their operations at individual country level are now increasingly operating on a European level. The single currency promotes this process by removing the final barriers in the Single Market, such as currency fluctuations. As a result, pan-European companies have huge advantages over smaller companies producing for local markets, since EMU eliminates expenses across Europe and leads to economies of scale. In 1995, for example, the US-based sportswear producer Reebok International had 14 distribution warehouses for its European market; three years later, only 10 were left. By 1 January 1999, when the Euro was introduced, a single distribution centre remained. This trend leads both to massive job cuts, and to a significant increase in the environmentally damaging long-distance transport of goods.

As a Morgan Stanley economist has remarked, “If you remove currency as a safety valve, governments will be forced to focus on real changes to become more competitive: lower taxes, labour market flexibility, and a more favourable regulatory backdrop for business.” [ii] Under this scenario, the future for progressive policies like ecological tax reform, together with other measures to protect people and the environment, looks bleak indeed.

Whence globalisation?

This process of economic globalisation hasn’t happened by accident. It has been driven over the past three decades by the world’s leading business elites, one of the most powerful of which is the European Roundtable of Industrialists or ERT.

The ERT’s unprecedented access to decision makers at both European and national levels has given it enormous influence over the EU’s political agenda, and ensured that policies are increasingly introduced which favour the agenda of large corporations and promote economic globalisation.

Founded in 1983, it consists of around 45 highly influential heads of industry from European multinational companies, with a combined turnover approaching £400 billion. Its explicit aim is to change the way that Europe is managed; as a former ERT Secretary-General has put it:

“Industry is entitled to a system that delivers results: an EU which functions like an integrated economic system with a single centre of overall decision making”.[iii]

The ERT: an early advocate of the Single Currency

The ERT, ever anxious to increase international competitiveness, was an early and vocal advocate of European Monetary Union. “Japan has one currency. The US has one currency. How can the Community live with twelve?” it asked in 1991.

A few years earlier it had set up a separate body, the Paris-based Association for the Monetary Union of Europe (AMUE), to take forward its agenda on EMU. Its influence has been significant, as former Commission President Jacques Santer has gratefully acknowledged. Addressing an AMUE board of directors meeting in 1998, he said, “The members of the Association have been a major driving force behind the EMU project. Many of your companies have played a leadership role by clearly advocating the advantages of the single currency for the private sector and society as a whole”.

Will the Euro fit Euroland

What is an optimal currency area?

But what of our other three main critiques?

You’ll recall that I said the first of these had to do with the size and diversity of Euroland. Frankly, I think it’s potty to imagine that one set of interest rates can possibly be simultaneously appropriate for all the 15 member states of the EU – plus the extra 10 or 12 which are still to join, following the enlargement process. Their histories, economies, politics and culture are far too diverse – it’s inevitable that the more peripheral areas will be marginalized.

For example, in 1997, GDP per head in the EU’s richest cities was five times that in the poorest rural regions. Unemployment levels in the worst hit regions of Spain were 10 times higher than in the more prosperous areas of Austria and the Netherlands. Consider that even within the UK it’s hard to set interest rates at a rate which is helpful for the overheating South and the more depressed North at the same time. So how much harder will it be across the whole of the EU? Common sense alone would suggest that this is a doomed project.

EMU: Deflationary monetarism writ large

Even if it were not the case that Euroland is too large and too diverse for a single currency to operate efficiently within its borders, we would still be concerned by the unnecessarily strict and narrow form of monetarism that is enforced by EMU. All the rules imposed on participating countries aim to control inflation tightly by restricting the supply of money. Little or no attention is paid to the wider economic consequences of this such as the effect on employment or the environment.

The ECB’s priority is to set interest rates at levels that ensure that inflation stays below its target of 2%. Public spending and government borrowing are limited in order to restrict the money supply. This is the case even the EU member states outside the Euro-zone who are nevertheless still required to comply with the rules of EMU.

A prominent critic of the strictures this places upon national governments was the former German finance minister Oskar Lafontaine. Yet you’ll recall that he was swiftly removed from post after arguing that the German government should adopt a more reflationary approach to address the growing problem of unemployment. In many ways, Lafontaine’s departure marked a symbolic victory for the ECB over national governments. It also confirmed the new deflationary monetarist orthodoxy that surrounds the Euro.

Democracy under EMU

Our final critique is based on the undemocratic nature of the EMU project. With the introduction of the Euro, control of interest rates passed from the member states’ central banks to the ECB. Inflation targets are pursued by the ECB and the exchange rate strategy for the single currency is determined by the EMU finance ministers of ECOFIN in consultation with the ECB. Domestic fiscal policy is constrained by the need to meet the conditions of the Stability Pact. In short, much of the economic sovereignty of member states of Euroland has been pooled and handed over to European institutions, primarily the ECB.

Of course, in a true democracy the various electorates of the EU would be free to pool their sovereignty as they wish and to hand it to the institutions of their choice. However, two major questions hang over the democratic credentials of the EMU project.

The first relates to the ECB itself. It is guaranteed far greater freedom from political intervention than any of the central banks of the Euro’s member states enjoyed. This contrasts with the situation in Britain for example where even the newly ‘independent’ Bank of England works to government-determined inflation targets. Allowing for differences in the way the inflation index is calculated in Britain and Euroland, the Bank of England’s inflation targets are currently as tight as the ECB’s. However, they can be varied to suit wider economic conditions and the Bank of England could even see its independence removed by a future government. Nothing short of a revision of the Treaty of Rome would be necessary to change the relationship between the ECB and political institutions of the EU.

The powerful and independent position enjoyed by the ECB does not rest on a democratic mandate. A committee of six runs the ECB, including the president and vice-president. They are unelected and unaccountable to the voters. In effect, it is these people who have their hands on the principal economic levers of Euroland. They position those levers to meet the tight monetarist criteria of the Maastricht Treaty almost without regard to the level of unemployment or of mortgage repayments in Euroland. This situation falls a long way short of our definition of true democracy.

EMU’s second area of democratic deficit concerns the process that brought the Euro about. EMU has always been as much, if not more, of a political rather than an economic project. Rarely have the people of the EU member states had the opportunity to decide whether to accept EMU without the wider issues of political integration coming into play. For instance, the Maastricht Treaty was subject to referenda in a number of member states. It set the ground rules for EMU but it also dealt with several other important issues. It is therefore impossible to interpret the half-hearted backing that the treaty received in those referenda as a firm endorsement of EMU. Indeed, public opinion throughout the EU remains sceptical of the single currency and the EU cannot claim to have demonstrated that EMU has the democratic support of the people.

Sustainability and the single currency

Earlier we defined the economics of sustainability as a system that: delivers decent housing and healthy food to all; maintains high standards of environmental protection; and provides a useful and fulfilling occupation for everyone without being exploited at work or sacrificing contact with family and friends. Fiscal and regulatory measures would reduce inequalities, eliminate poverty, ensure a good standard of education and healthcare, and promote environmentally benign forms of production and consumption. If such a system is to effectively meet the genuine needs of all members of society, it would need to be underpinned by a locally sensitive, decentralised system of democratic control. This is not a description of Britain’s economy at present. Far less would it be if we joined the Euro.

Power to the bankers!

If the people of the Euro-zone had chosen to adopt the institutions and policies of EMU and if they had the ability to change them when they see their effect, there would be more hope for Europe’s future. But the Maastricht Treaty was negotiated in utmost secrecy. It has become a parable of a political elite losing touch with the people. It also puts the ECB beyond any democratic control and contains no provision for a country to leave the single currency. This fundamental democratic deficit at the heart of EMU compounds the problems outlined above.

Indeed, EMU confronts the people of the EU with the powerlessness of their elected governments. Over time this can only stoke up resentment against the EU institutions and further undermine their democratic credibility. There is a danger that it will breed resentment between member states, as some are seen to prosper at the expense of others. This would unpick many of the hard won benefits that the EU has brought and generate a fertile climate for dangerous forces of European disintegration and nationalism.

After, and partly because of, the centuries of European conflict that culminated in the Second World War, very few people do not now profess the ideals of European internationalism and common progress. Supporters of a single currency claim that the Euro will further those ideals, but the very opposite is likely to be the case. The real internationalists are those of us who reject the flawed and dangerously narrow self-interest of EMU. Instead we look to a wider role for the European family of nations – one that furthers social and environmental justice and democracy throughout Europe, and beyond.

The debate about the single currency goes to the heart of the wider discussion about what kind of Europe Union we want. We can sign up to an EU of ever more open markets, dominated by corporate interests. Or we can work towards a more inspiring vision, where the EU takes the lead on key issues of peace and democracy; where it is in the vanguard of progressive policies to rebuild local communities and to further social justice and human rights; and where its environmental understanding and policy-making set an example for the world.

The debate about the Euro ought to be an opportunity to consider these ideas, to re-assess our vision of Europe, and to discuss how we will rise to the challenge of enlarging to the east and south. The present level of debate represents a tragedy of lost opportunity, for in the shallow exchanges between Europhobes and Europhiles, these critical issues relating to the future of the European Union are never addressed.

At the same time, monetary union is pushing the commitment to EU enlargement far lower down the political agenda, as governments grapple to make monetary union work and move towards development of political union. Indeed the advent of the single currency has made enlargement much harder, to the point that, for many analysts, the aims of further deepening the EU and of widening its membership are becoming mutually exclusive. Eastern European countries preparing to join the EU are already coming under intense pressure to prepare for the Euro too, in spite of the fact that, for them, the business of convergence will be extremely difficult, since their economies are at a much earlier state of development. Moreover, many Greens seriously doubt whether the terms of enlargement currently on offer will genuinely benefit the peoples of Eastern Europe – indeed, the opposite is likely to be the case. Countries such as Poland and the Czech Republic need sustainable development and flexibility, not the deflation and inflexibility enshrined in the EMU rulebook by the Maastricht Treaty.

The price of ignoring these issues will be high. Growing social inequalities between and within countries are only likely to be exacerbated by the single currency, generating fertile conditions for the rise of an ugly nationalist Right, while an ill-thought out, inadequately resourced and wrongly focused enlargement process will add further political and economic pressures. The spread of what could be termed "free market fascism", promoted by an EU which continues to put a corporate-led deregulated, free-for-all neo-liberal agenda above social justice and sustainable development, spells further marginalisation and exclusion for growing numbers.

This comes at a time when the EU already faces a major crisis of confidence, as the woefully low turn-out in the 1999 European Elections has demonstrated. People will only engage with a European Union that is relevant to their everyday lives, and which they feel is democratic and accountable. Economic and Monetary Union is moving in precisely the opposite direction.


[i] This section draws heavily on Balanya, Doherty, Hoedeman, Ma’anit, and Wesselius, Europe Inc: Regional and Global Restructuring and the Rise of Corporate Power, Pluto Press/Corporate Europe Observatory, 2000

[ii] Ravi Bulchadani, quoted in "The Euro – Special Report", op cit.

[ii] Keith Richardson (former ERT Secretary-General), Managing Europe: The Challenge to the Institutions, February 1998


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