How the Action Developed - for the European Currency*

for the European Currency*

2. How the Action Developed

The action taken by the MFE towards a European currency was also made possible by working closely with Robert Triffin� It can be said that in the MFE Triffin found a political movement willing to back his proposals, and in Triffin the MFE found an authoritative international voice in favour of monetary reforms in a federalist perspective, both in Europe and worldwide� Robert Triffin was the economist who designed and directed the European Payments Union (EPU), an institution that was inspired by the Clearing Union proposed by Keynes in view of the Bretton Woods negotiations� The EPU, which was active from 1950 to 1958, made European currencies convertible, a precondition for the economic reconstruction of Europe and the functioning of the IMF�

14 Ibidem, p� 164�

15 Ibidem, p� 168�

16 Ibidem, p� 169�

Triffin is also known for his Dilemma, which predicted the breakdown of the Bretton Woods system�

With regard to European monetary integration, Triffin himself succinctly described his relationship with Jean Monnet, as initially characterised by “total disagreement�” In 1950 Jean Monnet was designing the ECSC and Robert Triffin was launching the UEP, which he considered superior to the subsequent EMS (European monetary system)� Here, in summary, is the structure and the political effects of the monetary institutions created by Triffin: “The success of the EPU – recalls Triffin – quickly surpassed all hopes and defeated the initial scepticism of Jean Monnet and the objections of many other economists and financial and political executives� In 1957 Monnet enthusiastically supported my proposals to transform the EPU into a European fund of reserves where the central banks from each country in the Community would hold a common currency called the ECU, a growing proportion of their gold reserves and foreign currencies� In the final stage, the total conversion of their reserves into ECU would lead to the creation of the Central Federal Bank of the monetary, economic and political Union of Europe�”

In 1969 Monnet phoned Triffin, then in Yale, to ask him to come to Paris urgently� In Paris, as Triffin recalls: “Monnet explained that he had convinced the Chancellor Willy Brandt to present our proposal to create a European fund of reserves at the first summit conference in The Hague�

We had to get a move on and give the Chancellor all the documentation and economic statistics that the Ministry of Finance and the Bundesbank were stubbornly holding back”¹⁷� This brief summary given by Triffin of the role Monnet and he himself played at the summit in The Hague, is confirmed in Jean Monnet’s Memoirs in which he relates that despite the fact that currency “was still viewed as an almost magical expression of national sovereignty”, Brandt understood the proposal and “ensured that the proposal for Economic and Monetary Union and a European fund of reserves was accepted in The Hague,” as put forward by the Committee for the United states of Europe�¹⁸

The federalists of Turin were the first to react to the signs of crisis in the Bretton Woods system of fixed exchange rates� In a conference held in Turin in 1969, they presented a document entitled For a European system of reserves¹⁹ by Alfonso Iozzo and Antonio Mosconi� The same document

17 Ferrante, C� and Sloover, J�, Robert Triffin Conseiller des Princes, Bruxelles, Editions Ciaco, 1990, p� 95-96�

18 Monnet, J�, Memoirs, Paris, Fayard, 1976, p� 583�

19 Jozzo, A� and Mosconi, A�, “Pour un système européen de reserve”, in Le Fédéraliste, No� 2, October 1969, p� 71-78�

was the basis for a conference, in 1970, in Turin, which was attended by Robert Triffin, Rinaldo Ossola and Mario Albertini²⁰� This was followed by a growing corpus of individual and collective theoretical contributions from “expert” federalists, up till the creation of the EMS (European Monetary System) in 1979� I will list the main ones here: the special edition of Le Fédéraliste in 1974, with texts by D� Velo, A� Majocchi, D� Moro, G� Montani; the conference “A currency for Europe”, held in Pavia in 1976, based on a preparatory document by G� Montani and D� Velo, with the participation of Giovanni Magnifico, economic adviser to the Bank of Italy and Manfred Lahnstein, director general of the Ministry of Finance of the FRG, Emil Claasen, economics professor at the University of Paris, Antonio Mosconi, director of the Fiat holding company, Giandomenico Celata from the CGIL trade union and Mario Albertini; the conference entitled “Monetary union with the prospect of a European election”, held in Turin in 1977, with the participation of Giovanni Magnifico, Robert Triffin, Gaetano Stammati (Treasury Minister), Cesare Romiti (CEO of FIAT), Paolo Savona (Director of Confindustria), and Luciano Barca (PCI); the conference organized by the French section of the UEF, in Paris in 1977, with Robert Triffin, Giovanni Magnifico, Pierre Werner, Boyer de la Giroday, Rainer Masera and Michele Fratianni, and the conference organized in 1978 by the Dutch section of the UEF in Eindhoven on “A United and Democratic Europe, Now or Never”, with the participation of Henry Brugmans, John Pinder, Martin Bangemann, Pierre Werner, H� Vredeling and G� Montani�

This long list is by no means an exhaustive one, as can be seen looking through past issues of Unità Europea for that period, during which a host of initiatives were organised by local chapters of the MFE� Federalist pressure on the European political class culminated in the conference in Rome on 17-18 June 1977, entitled “Economic union and the question of the European currency” – organized by the MFE in collaboration with the European Movement, and chaired by Giuseppe Petrilli – by which time the direct election of the European Parliament had been decided� The personal relationship and mutual esteem between Albertini and Petrilli made for an outstanding collaboration between the two organizations, without which it would have been impossible to make the initiative a success� Over several months the two movements discussed both the topics and the guest list, which meant taking lengthy journeys abroad to present the aims of the conference to the various speakers� After the strategic success achieved with the direct election of the European

20 All the reports were published in The Federalist, No� 1, 1971�

Parliament, the federalists set out to exploit the election to force the parties in the elected Parliament to give their immediate support to the proposed EMU�

The conference proceedings were published in full²¹, and one look at the contents page gives an idea of the intellectual and organizational effort that the Italian federalists put into it� In his introductory report Petrilli noted that the failed attempts to implement the Werner Plan, “should make us set aside the traditional opposition between economists and monetarists, as it no longer applies to the current situation,” referring to the division between those who wanted national economies to converge before the creation of the EMU and those who supported a fixed exchange rate regime as a condition of convergence� According to Petrilli, “the creation of the European currency must in the first place enable the globalization of the Community’s balance of payments, which in turn requires a set of income transfers within the integrated economic area� The latter are only conceivable in the presence of a European executive with autonomous spending power and powers to coin money, and therefore able to implement employment policies and investments on a European level, addressing the nodes connected to the presence of structural inequalities�”²² In his report Pierre Werner, after analysing the extrinsic and intrinsic causes for the failure of the plan he drew up in 1970, proposed breaking the deadlock by: “a) reconfirming the ultimate goal of Monetary Union, as described in the report of the Werner group, and setting a time limit for it, which could be extended by a few years if necessary� […] b) deciding on a short-term state of ‘pre-monetary union’ characterized by a set of consistent measures to strengthen both economic and monetary solidarity, and policy convergence�”²³ In his report summarising the preparatory work carried out by the MFE study group, Alberto Majocchi framed the crisis in the process of European integration in the global context, namely the crisis of the Bretton Woods system� Europe contributed to this crisis, because “it was not able – in parallel with the growth of the Common Market – to take on a more active role in the system of international payments and by not taking part in financing world trade, it effectively sterilized monetary resources�” The system of generalized fluctuations, supported by economists like Milton Friedman, did nothing to solve the problems of Europe, or those of the rest of the world� In Majocchi’s view it was intended as a move towards a world “where the internal market

21 ME-MFE, L’unione economica e il problema della moneta europea, Milan, Franco Angeli, 1978�

22 Ibidem, p� 23-24�

23 Ibidem, p� 39�

and the international market would self regulate effectively,” but this was not the case, because “the process of fluctuation, rather than reducing the imbalances that exist in the international market between weak currencies and strong currencies, tends to accentuate the gaps; […] if there is not a democratic supranational authority with the power to control the economy and the currency, the result is the hegemony of the strongest state�”²⁴ In Europe the generalized fluctuation of currencies had disastrous consequences� “Fluctuation caused a sharp decline in the volume of trade in Europe and worldwide, and gave rise to a strong push for protectionism in our countries�” For this reason it was vital to relaunch the EMU� It should however be clarified that “in our analysis European currency does not mean a pure and simple return to a fixed exchange rate system� […] We feel it is extremely important to strengthen the central budget of the EEC, devoting a quota of VAT income to the Community, […] and making a commitment to use all Community funds for the purposes of equalizing and stabilizing cyclical trends�”²⁵

At the conference the MFE study group presented several introductory papers on key issues of an economic, social and political nature� The authors of these were: G� Montani, A� Majocchi, D� Velo, C� Romiti, A� Mosconi, A� Jozzo, G� Meroni, G� Usai and D� Moro� Communications at the Conference were presented by G� Magnifico (Economic Advisor to the Bank of Italy), R� Masera (head of the Monetary Department at the Bank of Italy), and E� Tuccimei (Vice Director of the Bank of Italy)�

I would like to mention just a few of the 27 addresses given, many by party representatives� Emilio Colombo, President of the European Parliament, after mentioning the increasing public attention to the direct election of the European Parliament, stated that he found “the approach to the elections for the European Parliament formulated by Professor Petrilli and put forward by the MFE, to be fair and just”; Gaetano Stammati, the Treasury Minister, observed that in 1971 “there was no unified European response to the crisis of the dollar, and the snake in the tunnel construction revealed all its fragility, above all due to the fact that it fell to the weaker countries alone to support the weight of this construction, namely joint fluctuation�” Dirk Spierenburg, Chairman of the Dutch government’s Committee on “The European Union” stressed the crucial question of the relationship between monetary union and national budgetary policies�

According to Spierenburg, “the Union would need to have regulatory powers over certain important elements of national budgets: a� annual admissible variations in the level of public spending; b� the permissible

24 Ibidem, p� 46-7�

25 Ibidem, p� 51, 53-54�

scope of budget deficit; c� the way the deficit could be financed� The Union’s institutions should therefore establish the limits of fiscal policy, but governments would remain free to choose the items of the budget within these limits�” Lastly, Spierenburg stressed the political importance of setting a date for the EMU, although its implementation could proceed in stages,

“according to a previously established schedule�” He concluded his speech with the following words: “I believe you were right to target the political parties, so that once the European Parliament is elected, its new members can immediately address the question of the EMU�”

It is very difficult, perhaps impossible, to understand how and at what speed ideas travel among active politicians, namely those who are pressured by urgent issues and have to make decisions� The fact remains that in October 1977, in the European University of Florence, the then President of the European Commission Roy Jenkins, gave a speech on Europe’s present challenges and future opportunity, which was decidedly in favour of creating the EMU� As he put it: “My belief is that we should use the period immediately prior to the first direct elections of the European Parliament, to re-launch a major public debate on what monetary union has to offer�” He went on to pinpoint the issues, costs and benefits of Monetary Union� His observations on the relationship between monetary Union and European taxation were especially significant, observing that:

“in the Community of today, we have a battery of financial instruments, but all of them rather small guns�” Monetary Union required a quantum leap, namely a significant (but not impossible) increase in the European budget� As Jenkins recalled: “The overall magnitude of budgetary spending at the European level for this type of community has recently been estimated by a group of independent economists under the chairmanship of Sir Donald McDougall� As against present Community expenditure of the order of 1% of GNP, they estimated that very substantial progress on economic integration could be achieved with the aid of expenditure of 2 to 2�5% of GNP; they believed that a definitive monetary union might be viable with expenditure of the order of 5 to 7% of GNP� These are of course very large sums of money, which would have to be built up gradually by a transfer of some expenditure from national budgets and not by a superimposition, but they are quite small by the standards of the classic federations where the top tier of government takes 20 to 25% of GNP� There is therefore for the Community a new and realistic model for a highly decentralised type of monetary union�”²⁶

26 The speech by Roy Jenkins in Florence, his subsequent speech to the European Parliament and a summary of the McDougall Report were published in Il Federalista, No� 1, 1978�

The speech given by the President of the European Commission in Florence appeared to give further confirmation of that the political initiative conducted by the MFE had been successful� In the space of a few years the proposal for a European currency had been accepted by the Community’s institutions� In addition to that the Commission, thanks to the McDougall Report, had provided a major missing piece in the general framework outlined by the federalists, by quantifying the minimum size of the EU budget, 2 to 2�5% of GNP, needed to create a pre-federal union, i�e� excluding defence spending� This proposal concerning the fiscal capacity of the Union, together with the strategy that emerged from the Conference in Rome, for a pre-monetary union, made the entire project even more realistic� It was time for the national governments to have their say and decide on the next steps to take�

A plan for “pre-monetary union” was in effect announced by the European Council in Bremen in July 1978, based on a joint proposal from the French President Valéry Giscard d’Estaing and the German Chancellor Helmut Schmidt� In December 1978 the European Council in Brussels finally decided to launch the European Monetary System (EMS), namely a system of fixed exchange rates between the European currencies, which aimed to make Europe (then with nine member states) a zone of monetary stability in a world of floating exchange rates� Overall, it was a proposal that fell far short of the indications in the Werner Plan for the EMU, and the demands of the federalists� The EMS was a system of fixed exchange rates in reference to a central rate, the ECU (European Currency Unit), which is a weighted average of European currencies� What was new about this was that the European currencies no longer had the dollar as their point of reference, but a basket containing only European currencies� It was a timid step towards the full monetary autonomy of Europe, which only came about in Maastricht� The EMS also included weak solidarity mechanisms between the different central banks and, in theory, the creation of a European Fund of reserves, as Robert Triffin and the federalists had requested� However, due to the opposition of the Bundesbank this Fund (which would have been the first step towards European monetary sovereignty) was never established²⁷�

The establishment of the EMS was the end of the first crucial stage of the federalist struggle for a European currency� In Italy it was rekindled once more in 1978, when the question of Italy acceding to the EMS arose� As it meant a return to fixed exchange rates and a policy of

27 On the creation and development of the EMS, see Gros, D� and Thygesen, N�, European Monetary Integration. From the European Monetary System to European Monetary Union, London, St� Martin’s Press, 1992�

budgetary rigour, there were protests against Italy joining the EMS from the protectionist ranks, including Confindustria, various trade unions, certain economists (especially Keynesian economists), some political parties and even the Bank of Italy� The MFE reacted strongly, and counted on the support of Altiero Spinelli, who by then was a member of the Italian Parliament and did not hesitate to speak out against the PCI, which wavered between the new prospect of Eurocommunism and safeguarding the interests of national trade unions� In the end, however, Italy joined the EMS partly thanks to a special clause enabling a less stringent exchange rate constraint�²⁸

In the run-up to the first universal European elections, the European Union of Federalists (UEF) pointed out to Europe’s citizens the close relationship between the European election and the construction of a European government� In a motion of March 1979 the UEF Federal Committee, having approved the report presented by its President, Mr Albertini, proposed: “a) the need to intensify propaganda for the European currency, for a Community budget appropriate to the situation, for the creation of a European government; b) the completion of an agreement between MEPs and federalist forces in order to raise the profile of the work of the European Parliament; c) a commitment to establish genuine European political parties�”²⁹ A European currency, European budget and European government therefore became the central objectives of the federalist strategy for exploiting the new supranational democratic power gained with the direct election of the European Parliament�

From then on, until the end of the first term, the federalists focused their attention on the constituent project championed by Altiero Spinelli in the new European Parliament� The MFE and the UEF attempted to play an active role in terms of public opinion on a national level, re-launching the battle for the constituent initiated by the MEPs� The “Draft Treaty establishing the European Union”, voted for by a very large majority in February 1984, on the eve of the second European election, effectively created a democratic government for the economic and monetary union, given that foreign policy and defence were still seen as a potential competence, temporarily to be handled by national governments� The

Im Dokument The History of the European Monetary Union (Seite 165-173)