states also followed Britain’s lead in profoundly questioning their welfare systems’ efficacy, relations between state and industry, and the state’s role itself.
How different the responses were can be seen by comparing Britain and France. Whereas the Thatcher government in 1980–83, beset by strikes in most basic industries, an over-valued currency, and historically high interest rates, abandoned thirty years of neo-Keynesian macro-economic management and instituted deflation and tight control of money supply, reducing state expenditure at the height of the recession, France embarked on what has been described as ‘socialism in one country’ after Mitterrand’s PS/PCF victory in the May 1981 presidential election. While the rest of the EC watched the Thatcher experiment with a mixture of horror and fascination, as market liberalism gave birth to the privatizing of state industries on an unprecedented scale, Mitterrand’s government abandoned the Plan Barre (whose austerity had been partly responsible for Giscard’s unpopularity) and introduced a new policy of widespread nationalization.
Pierre Mauroy’s government, a coalition of Socialists with four Communist ministers, sought to reflate the economy by redistributing wealth in order to generate higher spending among poorer groups, and hoped to increase employment by classic job-creation programmes, including reductions in working hours. The price was high in terms of currency instability, while the budget deficit multiplied seven-fold in two years. Inflation stayed stubbornly high and the trade deficit nearly doubled.
The crux in France came with the major currency crisis in March 1983, following two earlier deliberate devaluations. Whereas the Ceres left of the PS (like the British Labour party’s left in the mid–70s) had been advocating protection, regardless of what EC partners thought or would permit, Mitterrand and the new finance minister, Jacques Delors, after an initial reconsideration in June 1982, changed radically the government’s whole economic policy to one of increasing austerity. The second package included not only a substantial enforced devaluation, but a budget freeze, a stabilization of the franc, and an end to public sector recruitment.43 Mauroy was replaced as Prime Minister by Laurent Fabius, and the remaining Communist ministers resigned.
France’s experience seemed to prove that no member state, even one with France’s record of political leadership, could act continuously contrary to the global trend – in contrast to the United States which, having first instituted ‘Reaganomics’ as the antithesis of New Deal interventionism, had actually arrested its industrial decline by an expansionist fiscal policy close to classic Keynesianism. But Mitterrand’s grand tournant also affected the EC’s political balance. In 1981, French socialism had consorted uneasily with Schmidt’s brand of social democracy in West Germany (even if some German commentators remained sceptical about its validity, assuming that Mitterrand was at the time finessing his own Socialist left and his Communist allies in the ‘common programme’). But once Mitterrand accepted failure in 1983, and adopted a policy closer to market liberalization and EC integration, revulsion from protection and isolation removed many of the French objections to EC enlargement, to solving the British budget problem, to reform of the CAP and EC institutions, and above all to completion of the internal market.
Mitterrand’s transition from a ‘worker’s Europe’ to ‘no Europe without a social Europe’44 occurred as Helmut Kohl became chancellor, leading a CDU/FDP coalition. With Hans-Dietrich Genscher as more or less perpetual foreign minister, and continued domestic principles of low inflation and monetary stability, Germany’s EC position barely changed. Balancing the Ostpolitik in the framework of EC integration again took the form of a low profile foreign policy, acceptable to both centre-left and centre-right in Germany, which avoided any semblance of desire to lead the EC, and set increasing emphasis on integration – to be achieved by the same Franco-German entente as before (see chapter 7).
The fact that by 1983–4, political and economic conditions had been created which made France a willing collaborator, not only in economic but in all dimensions, provides one major explanation for the EC’s subsequent regeneration. In achieving that, Kohl’s personal support strengthened Mitterrand, especially during the crucial French Presidency in 1984, as Schmidt’s had Giscard in the late 1970s, while governmental and institutional linkages supplemented the rapprochements between individuals. But that this could happen was only clear by mid–1983. At that point, the British had to accept that there was no advantage in pursuing bilateral Anglo-German or Anglo-French alternatives, a point already demonstrated when the foreign secretary Geoffrey Howe played a Gaullist card in May 1982 and tried to use the veto to prevent a settlement on agricultural prices, only to fail for lack of a minimum number of allies in the Council of Ministers.
Taken together, the years 1980–83 were a period of fluctuation in the EMS,45 nine elections, national defensiveness, distortion of competition, and the introduction of often blatant means to evade free movement of goods. All went far to undermine collective faith in the efficacy of EC legislation and rules. Trade rivalries and different responses to the Soviet Union seemed at the same time to align the continental EC states against Britain and the United States. Spanish entry to NATO in May 1982, and Greece’s factious game-play once Andreas Papandreou’s left-wing Pasok came to power in October 1981, suggested the existence of a new north-south cleavage in Europe, to add to the existing ones of large versus small states, socialist versus non-socialist governments, and the wealthy core versus peripheral regions.
At the centre, the Commission, under the genial but lightweight Luxembourger president Gaston Thorn, could find no obvious consensus about the EC’s future nature and functions. Some talked of a two-tier system and variable geometry or core-periphery models,46 while others turned back to de Gaulle’s model of a Directoire.
On the other hand, some operations at Brussels were steadily becoming more collegial, if not among foreign ministers, at least among their finance colleagues on ECOFIN. The evolution of Coreper, the informal association of member states’ Permanent Representatives, into a flexible instrument preparing policy for the Council, together with increasing specialization in the Council and its Secretariat, ensured that majority voting was coming into more frequent use: 90 times in 1979–84, as against 35 in 1974–9 and a mere 10 in 1966–74.47 Informal processes and pressures induced compromise and diminished the use of the veto: even France helped to vote the British down when they essayed the Luxembourg Compromise in May 1982. This represented a trend towards a philosophy of incremental momentum, of ‘getting things done’, about which Mitterrand and Thatcher, its foremost opponents, were evidently aware. The process long predated the 1980s revival, and owed much to the other, more integrationist states of Benelux, Italy, Ireland and Germany, albeit each for different reasons.
The pursuit of the internal market centred on three consequential proposals: firstly, the Commission’s own report on regenerating industry, reforming CAP, and solving the budget issue (June 1981), secondly, the committee set up by the Council to draft amendments to the Treaties, to which were added, thirdly, the topics of strengthening the internal market, energy policy, industrial innovation and research, together with proposals on Mediterranean agriculture and job creation, especially among the young. These can be seen as preparatory to the November Council Meeting in London under the British Presidency. But the French also put alternative proposals in October, and in a parallel action, Genscher and Emilio Colombo submitted independently to Parliament in November a draft European Act and statement on integration.
The London Summit might therefore have been the occasion for renewal. That it was not can be attributed partly to Britain’s budget problem and partly to the principle of unripe time.48 Nevertheless, Mrs Thatcher became the first Prime Minister to address the Parliament, and a number of concessions were made to its demands for greater powers over the budget process. (These did not stop the Parliament threatening Council with ECJ proceedings in September 1982 for its failure to institute a common transport policy. The European Parliament now saw itself, conjoined with the Court, as one means eventually to subvert inter-governmental dominion.)
Meanwhile, exposed to the recession and confronted by the greater spectre of American and Japanese inroads into their markets, industries and businesses, especially the larger and multinational firms, began to campaign more publicly than in the past for a more effective