Norman Stone - The Atlantic and Its Enemies

The point as to the ERM was that it was the product of a world of two decades before, the failure of the Bretton Woods system. It could only really be made to work if there were real partnership, i.e. if the German Bundesbank agreed to support currencies such as the pound that were based on very different economies from the high-saving German one. Any restriction of credit, in pursuit of exchange rate stability through higher interest rates, would mean unemployment, but the ERM had become a sort of totem, and the Americans, who had invented its original version, were in support. ‘Europe’ was a sort of deus ex machina for dealing with intractable internal problems, as the Italians, welcomingly, had found, and as Mitterrand in France, needing a bomb to blow up his allies on the Left, astutely discovered when his wooden Brave New World collapsed in 1982-3. It became, as a nineteenth-century English radical had observed of foreign affairs, a sort of outdoor relief for a sort of aristocracy, and for that matter the Foreign Office, not, generally, having much of a role, and having weakened its esprit de corps with half-baked positive discrimination, now found a role: it could interpret the awful complexities of Europe for politicians who had many other things on their minds.

A Sir David Hannay was apparently deputed to ‘Europeanize’ Margaret Thatcher, to inform her of the advantages of the institutions of what was supposed to be a united Europe. She took up the invitation to address the training school for European bureaucrats, the Collège d’Europe, at Bruges, in Belgium. Even then, she went not out of enthusiasm but because she had to be in Luxemburg anyway. Just then, the ‘president’ of the European Commission, Jacques Delors, was promoting his own candidacy for renewal quite vehemently: Germans, latterly, had been collecting such functions (as Manfred Wörner had done with NATO) and Delors wished to keep his. He went the rounds, making European speeches, announcing that within six years there would be a real government and a real parliament, responsible for ‘80 per cent’ of all laws passed in Europe. A few weeks later, the British Trades Union Congress gave him a standing ovation, as he sketched a picture of a left-wing Europe, with social benefits and low unemployment. In September 1988 Margaret Thatcher made her Bruges Speech, having lost from the draft a good part of the Foreign Office emollients, and made a characteristic assessment of Europe as she saw it — she played up the British contribution, but then told truths, to the effect that Brussels had been painfully slow and reluctant as regards the freeing of markets and capital movements, and that ‘we have not successfully rolled back the frontiers of the state in Britain only to see them reimposed at a European level, with a European super-state exercising a new dominance from Brussels’. It was a good swan-song; but the fact was that she had already lost the campaign. ‘Europe’ was marching on regardless, and even Geoffrey Howe, the Foreign Secretary, regarded the speech with ‘a weary horror’.

There were Europeans of some enthusiasm in influential positions all around; they, too, were somewhat shocked. It was put about that there was no such ambition for a European federal state, that ‘federal’ meant something different to the Germans in particular, that it was all xenophobic fantasy. In 1988-9, interest rates were rising, with inflation, and the ERM appeared to be the solution. It was quite widely advocated by very influential people, and the Americans, by now, were in favour of it, because it would support their own efforts to control the dollar’s value abroad. In the spring of 1989 a report, given the name the ‘Delors Report’, outlined what should be done to unify the Continent and its various currencies. Robin Leigh-Pemberton, Governor of the Bank of England, had signed it. It outlined ‘stages’ towards unity, in a manner supposed to be non-committal but in practice very influential. The fact was that a very powerful establishment wanted the Europeans’ ‘stages’, and certainly the ERM. Margaret Thatcher had, as ever, a large voting army. But many of her senior officers were near mutiny. The Delors Plan was supposed to be discussed by European heads of government in Madrid, in June 1989. The Spanish expected to make their first important mark at this, their first presidential European ‘summit’. The Prime Minister rejected this, but then found that even in private the people to whom she listened disagreed. Both Howe and Lawson asked for a joint interview on 25 June 1989 and threatened to resign. She gave way. At Madrid, she did agree to ‘Stage One’, though privately adding to Charles Powell, ‘We can’t stay in this bloody common market any longer.’ The full-scale European Monetary Union had been postponed, but ERM, as a stage towards it, had been in effect endorsed.

That summer, the post-war Conservative Party started to disintegrate. The Poll Tax was supposed to take effect in the spring (1990) and the party stood low in the opinion-soundings. At that point, one of her few remaining allies, Nicholas Ridley, spoke indiscreetly, as he was wont to do, and denounced the ERM as ‘a German racket designed to take over the whole of Europe’. The sentiment was wildly expressed, and it was an exaggeration: but, as with much that Ridley said, there was truth in it, in so far as German credit conditions would have to be valid for all of Europe, and that, in Britain, would mean high unemployment. Misfortune again came when some Irish terrorists assassinated Ian Gow, a wise adviser, and his successor as Parliamentary Private Secretary was not, by far, of the same class (he even wanted to extract a public oath of loyalty from the MPs). The middle party took Gow’s seat at a by-election, with a very large majority. There was of course the perennial stalking of the foreign stage, but Margaret Thatcher’s great moment had passed, with the waning of the Soviet Union. Her last act was to stiffen the resolve of the American President, George Bush, when Saddam Hussein invaded Kuwait in August 1990.

The next round of exhausting European wrangling was set for Rome, with the Italians chairing proceedings. Early in October, the concession, to join the ERM, was at last made. But the Europeans wanted more, an advance towards the Delors stages for proper unification. In their view it mattered much more, now, because, without formal unity, an enlarged Germany might be a great and malevolent force once more. One of the ‘stages’ involved an irrevocable commitment to monetary union (as it happens, with fixed exchange rates planned for 1994). Mrs Thatcher hated the ‘grand and vague words’ of these European occasions, and disliked what they portended. She said, about the tired metaphor of not taking the European train as it was leaving the station, that ‘people who get on a train like that deserve to be taken for a ride’. She denounced the Italians’ ‘mess’ of a presidency, and said, in Parliament, in grand-actress style, ‘No, no and no’ to all three Delors proposals. Howe resigned, and wrote a powerful letter; when the party chairman attempted to explain this away, he spoke on 13 November very powerfully indeed in the House of Commons, apparently much of the statement at the dictation of his wife. And then Margaret Thatcher had to face re-election as leader of the party. She won, but by a very narrow margin and under a strange rule that required a second-round election. It was of course an extraordinary humiliation for an outstanding figure, though in British affairs it had happened before, not least to Churchill. Her ministers, on the whole, told her that they would not support her, and in the end Denis Thatcher told her that that was that. The next day, 22 November, there was a brief, tearful Cabinet. She broke down, and had to start the business again. Then she had to appear for a final Commons debate, on a motion of no confidence. She spoke with a command performance, perhaps her greatest speech ever; one of the greatest occasions in the history of the House of Commons. The eighties had been a magnificent counter-attack: just when the enemy thought it had won, its ammunition dump had exploded. The look on the faces of the seventies was a poem. But what did the eighties do, in England and America, with the victory of the ‘Seven Fat Years’? It had been in so many ways the best of times: Russia back in the Concert of Europe, China returning as a great world civilization, a recovered Germany with an entirely healthy relationship with her neighbours, an Atlantic that had recovered its vitality. There had been downsides to the eighties, perhaps those associated with democracy by the classical writers. But it had been the most interesting, by far, of the post-war decades.