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Issue 54, March 2001

Nice Aftershocks

LEADERS CLASHED at the European Union (EU) summit in Nice last December. The arguments centred around how to distribute votes in the institutions of an enlarged EU, incorporating mainly Central and Eastern European states. German representatives argued that the Federal Republic's larger population - 82 million compared with France's 60 million - should be reflected in voting procedures.

France, however, retained parity of votes with Germany in the Council of Ministers. But it was a pyrrhic victory, a diplomatic nightmare for France. The French elite voiced its fears that France had lost the political leadership of Europe. The planned enlargement of the EU was put back to 2004 and decisions on an EU constitution and restructuring disappeared into the dim and distant future.

The EU is in a constant dilemma. On the one hand, there is an impulse towards closer economic and political unity. This is because it is in the interests of the ruling capitalist classes of the EU states to be organised in a bloc against their North American and South-East Asian rivals. On the other hand, the different European nation states also compete with each other. Co-operation between the states is possible when interests coincide. In times of heightened tension - during an economic downturn, for instance - national interests often collide and the room for co-operation is dramatically restricted.

Throughout Europe, the institutions of the EU are unpopular. In a poll published in The Guardian (15 January), only 21% of German and 31% of British people expressed confidence in the European Commission, and 37% of French, 35% of German, and 34% of British people said they were happy with the way the EU is developing. Hardly a vote winner.


In spite of the rhetoric, enlargement of the EU has stalled with the front-row states of Central and Eastern Europe losing patience with the EU as new barriers are continually placed in their way. Even if they did join they would quickly find themselves as third-class Europeans, their economies preyed upon by big Western European conglomerates ruthlessly exploiting their human and material resources.

The European Commission has warned that the income gap between the poorest and richest regions would double from the present multiple of 2.6 times if the EU expanded to 27 countries. The EU's surface area and population are set to grow by a third but its GDP by only 5%. (Financial Times, 1 February) It is not, however, in the interests of any EU government to seriously propose spending massive amounts of taxpayers' money to subsidise these states.

The EU has always been a pro-big business project. It aims to implement neo-liberal policies of tax cuts for business, deregulation of the public sector, and attacks on workers' pay and conditions throughout Europe. Britain's New Labour chancellor, Gordon Brown, will be going to the Stockholm summit on 23-4 March proposing 'liberalising' the European energy and capital markets.

This is backed by the other EU leaders. Philip Stephens commented on the annual Franco-British talks in Versailles: "Behind the socialist rhetoric, Mr Jospin has been cleverly reformist. Thus it was a British guest who remarked... that the supposedly old-left Mr Jospin had privatised more state assets than New Labour's Tony Blair; that public spending in France was growing less fast than in Britain; and that a 15% corporation tax rate for small companies was the lowest around... It may lament the triumph of Anglo-American capitalism but it is playing the game". (Financial Times, 25 January)


Romano Prodi, president of the European Commission, criticised EU governments for the slow progress of opening up electricity and gas markets and postal services. He is pushing for the further liberalisation of the rail sector and wants to create a 'single European sky' for airlines - everything's for sale in the capitalist market.

In the euro-zone, the European Central Bank (ECB) sets the same interest rate for all the economies - a 'one-size-fits-all' policy. But differences between national inflation rates have increased since the euro was launched two years ago. According to Eurostat (the EU's statistical agency) annual French inflation stands at 2.2% and Ireland 6%. If the ECB tried to bring down inflation in Ireland and Spain by increasing interest rates, it would risk choking-off economic growth in Germany and France. Conversely, cutting interest rates to boost German and French growth stokes up inflation in Ireland and Spain. This is why EU finance ministers have been putting pressure on the Irish government to cut back its public expenditure.

There are signs that European industrial production is slowing. In January, the European Commission's industrial production indicator fell to 0.95 from 1.23 in December. The indicator has steadily declined since its 15-year high of 1.71 last June. The Reuters euro-zone Business Activity index, which measures activity in the service sector, is now at its lowest level since April 1999.

The differences will rise in the wake of the US economic downturn. And this will lead to the introduction of policies designed to make working-class people pay for the capitalists' crisis. In Spain, where the practice of linking wage rises to inflation is widespread, measures to curb inflation will inevitably mean a direct assault on workers' pay. That, in turn, would provoke action by working-class people as they fight to defend their living standards.


The crisis in the global economy will impact on plans to introduce the euro as a single currency replacing national currencies. By 1 January 2002, euro notes and coins are due to be in circulation alongside national currencies. On 1 March, national currencies will no longer be legal tender in the euro-zone. That, at least, is the plan. Even at this late stage, there is no guarantee that everything will go according to plan.

If it does go ahead, 302 million people in the euro-zone will be affected. The logistics of the operation are immense. By 1 January, 14 billion euro banknotes and 80 billion coins have to be ready. In the two-month transition stage, when euros exist alongside national currencies, retailers would need cash floats at least 20 times current requirements because customers unfamiliar with a new currency tend to use notes rather than change. EU officials are worried about the potential chaos that could provoke. A study for Netherlands Railway warned that queues at each window at Amsterdam central station would swell to 100 at 9am, rising to 1,200 by 10am. That scene could be repeated everywhere, leading retailers to fear a massive loss in profits.

Sweden's EU presidency will be a turbulent six months.

Manny Thain

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