Roy Jenkins
Page 66
Afterwards Mrs Thatcher lunched with members of the Commission. ‘She wasn’t tiresome,’ Jenkins wrote rather superciliously, ‘but left one with not the faintest sense of having been in the presence of anyone approaching the high quality of a great statesman or stateswoman, or even of someone who was likely to grow into this; she just seemed slightly below the level of events.’90 The next day he noted that Christopher Tugendhat seemed ‘a bit too oppressed by Mrs Thatcher. He doesn’t make enough jokes about her.’91
At the European Council (in Brussels, under Belgian chairmanship) on 5–6 December Jenkins presented his proposals formally to all the leaders together. Andreotti and the ‘little five’ were all enthusiastic, but of those whose support he really needed Giscard was cool, Schmidt reserved and Callaghan the friendliest of the three. ‘However,’ he recorded, ‘we got enough of what we wanted for the moment . . . I think that my tactic of not having a great row with Ortoli [who still wanted to go cautiously] and not presenting the European Council with too hard a choice at this stage has been correct.’92 Back in London just before Christmas, Jenkins dined at the Savoy with Edwin Plowden’s ‘now slightly ageing but still very powerful businessmen’, who had continued to entertain him regularly ever since he was Chancellor, and had ‘a good discussion on EMU’ with them. ‘They were all in favour of it but totally sceptical as to whether it would be possible for the politicians ever to do anything so imaginative.’93
So his mood at the end of the year was much more positive than in July, but still uncertain. He no longer felt suicidal – if he ever really did – but he still felt ‘a certain continuing regret at the loss of my position in British politics’, particularly since the British economy (under the tutelage of the IMF) seemed to have turned a corner during 1977. ‘Was I wise?’ he asked himself. ‘Who can possibly tell?’
Clearly had I taken Callaghan up on his offer to stay as Home Secretary and then become Chancellor again in six or so months’ time this would, in retrospect, have been a more enticing prospect than it looked at that stage. Would he have stuck to the bargain? I don’t know. But had I been there in the Government and available it might have been very difficult for him, under pressure, not to have moved Healey and put me in in the late autumn of last year, and clearly that would have been very much buying at the bottom of the market with fortuitously and no doubt undeservedly, an enormous reputation developing over the next six or nine months for having put things right a second time. However this would have been a fortuitous reputation and so I suppose one should not regret not getting things which one would not have totally deserved. In any case, my mind had become sufficiently detached from the general current of opinion in the Government that it was reasonable I should leave.94
Nevertheless he could not help reflecting that ‘if I had become Chancellor fourteen months ago I would obviously have been in an extremely strong position politically now’:
But that is all water over the dam, and I find that British politics, viewed from outside, while not as disastrous as I had thought previously, looks a pretty flat and unattractive landscape with no great figures on either side, although Callaghan and Healey are obviously the most dominating. There are no significant debates in the House of Commons such as we used to have in the late sixties, and therefore no great tug from that point of view.
On the other hand, if he had expected to leave a gap in British politics he found it chastening to realise how little difference the almost simultaneous departure from the scene of both himself and Crosland seemed to have made. ‘The country seems perfectly happy with a government of not very significant figures,’ he noted, faced by an even less impressive Opposition. He now regretted the opportunities he had missed earlier in the decade ‘through not being quite sure what tactical political line I wanted consistently to pursue’. He consoled himself with ‘a tolerable life in Brussels, something clearly well worthwhile though not at all easy and not immensely rich in achievement’. But one year in, his mind was already turning to life after Brussels. ‘But of the future . . . who can possibly tell, and the future is of course becoming nearer all the time.’95
For four months after Jenkins’ Florence speech it seemed that nothing very much was going to come of it. In Paris on 21 February 1978 he found Giscard, distracted by imminent assembly elections, still ‘favourable in theory [but] non-committal in practice’.96 But five days later the picture suddenly changed when, in the course of what he had expected to be a routine meeting in Bonn, Chancellor Schmidt ‘electrified me by announcing his conversion to a major scheme of European monetary integration’:97
You may be shocked, you may be surprised at what I intend to do, but as soon as the French elections are over, probably at Copenhagen . . . I shall propose, in response to the dollar problem, a major step towards monetary union.98
‘I shall never forget how my heart leaped during that exposition,’ Jenkins wrote in his memoirs. ‘It was one if the few occasions in my life when that cliché could justifiably be used.’99 Tickell’s minute precisely corroborated his account, and his delighted reaction:
Herr Schmidt said that after careful consideration he believed that a dramatic move forward was necessary after the French elections towards monetary integration. It was more than ever necessary to make a common front against the dollar . . . There were of course terrible risks. The Community might break up if such an initiative were to fail. Mr Jenkins said that he thought the risk should be taken. Herr Schmidt said that the risks of doing nothing seemed to him greater than now doing what he proposed.100
What had converted Schmidt was primarily the weakness of the dollar, which had fallen from DM2.30 the previous October to DM2.02 in February (and would fall further to DM1.76 by September), a collapse which made it, in Jenkins’ words, ‘increasingly difficult to regard it as a satisfactory pivot or arbitrator of a world monetary system’.101 ‘The flow of dollars into the Federal Republic had reached crisis proportions,’ Schmidt had concluded, threatening dangerous levels of inflation.102 His response was influenced by his low opinion of President Carter. ‘He had long believed in the American captaincy of the West,’ Jenkins wrote many years later. ‘But when the American ship of state began to founder, he thought that it was time to take to the European lifeboats.’103 At this February meeting he swore Jenkins to ‘utmost secrecy’ – he was especially not to tell his colleagues Ortoli and Haferkamp – but said he would break his decision to his friend Giscard ‘very soon’.104
As soon as he had secured his parliamentary majority (which saved him from having to share power with a socialist Prime Minister), Giscard signed up to Schmidt’s initiative and between them they gave the drive to monetary union a momentum – and the necessary political muscle – which resulted in the launch of the European Monetary System (EMS) within eighteen months of Jenkins proposing it, an almost unprecedented speed of movement in the normally sclerotic EEC. They revealed their hand at the Danish-chaired Copenhagen summit in April, when Schmidt expounded the whole scheme after dinner, proposing ‘a kind of European IMF’, and Giscard spoke of ‘a new Bretton Woods system within the Community’.fn9 The only doubts were raised, predictably, by Callaghan, who said it ‘went a great deal further than anything he had expected’ (only because, in Jenkins’ view, he had not taken in what Schmidt had told him when he visited Bonn in March) and worried that it might seem anti-American.105 As they broke up, though it was after midnight, he asked Jenkins back to his hotel to talk him through it with his officials, one of whom – the man from the Treasury – kept repeating in classic Sir Humphrey mode: ‘But it is very bold, Prime Minister . . . I don’t know what the Americans will say about it. It’s very bold.’106 Next morning Schmidt pressed Jenkins to help bring Callaghan on board. But at this stage the whole plan was still secret. The press reporting of the summit was all about plans for coordinated growth and the possibility of expanding the existing ‘snake’ which linked several currencies – but not the franc – loosely to the Deutschmark.
But there was no hint of what was actually under discussion. At his final press conference – to some 600 journalists – Jenkins declared himself ‘encouraged, even excited’ by the reception given to his ideas, without giving away too much.107
Before the next summit at Bremen in July Jenkins did his best to bring the British along. But Callaghan, while friendly, remained unconvinced. ‘Frankly he was a little miffed about the way Herr Schmidt and M. Giscard had fixed things up between them after the promises of co-operation which both had made at Copenhagen.’ He had stopped fretting about the American reaction – Carter was actually strongly in favour – but he was worried about transferring more resources to Europe when the UK was already paying more than its share: ‘If the British were to accept additional burdens, then something must be done to alleviate present ones.’ Jenkins conceded the point, but reminded Callaghan that, as Foreign Secretary, he had accepted the budget settlement in 1974 and urged that if Britain wanted reform in some directions, like the CAP, she should not block advance in others. Callaghan replied that he wanted to be constructive, but needed a quid pro quo: ‘He would not sign any old piece of paper. He wanted to see the colour of the horse.’108
Callaghan wanted more time, but Giscard and Schmidt were determined to press ahead, with or without Britain. At Bremen – where the Commission, to Jenkins’ satisfaction, occupied ‘a far more nodal position than at previous European Councils’109 – eight of the nine member countries agreed to pool 20 per cent of their gold reserves to create a $50 million central fund and a European currency unit, the ECU (or ecu) – a weighted average of members’ currencies – to come into operation in January 1979. The participating currencies would be brought into a narrow band of fluctuation against each other (1 per cent for the hard core, wider for the weaker currencies). Callaghan still reserved his position, but Jenkins’ patient diplomacy at least prevented him from committing himself definitely against or attempting a veto. At the final press conference (which he took alongside Schmidt), Jenkins explained that the EMS would be stronger than the existing ‘snake’ because the European Monetary Fund would have more reserves than the IMF. He said that he had never dreamed that so much could be achieved so quickly.110
There was still a hiccup at Brussels in December, when Giscard suddenly introduced a new, highly technical difficulty about agricultural subsidies (otherwise known as Monetary Compensation Amounts), which almost resulted in Italy and Ireland deciding to stay outside; in the end the French dropped their objection as inexplicably as they had raised it, both Italy and Ireland overcame their doubts and the first stage of the EMS came into operation three months late in March 1979. Only Britain, to Jenkins’ disappointment, stayed out. Over the autumn Schmidt had lost patience with Callaghan’s foot-dragging. He thought the British just wanted to use the EMS as an opportunity for another renegotiation. This, he told Jenkins on 30 November, was ‘out of the question. They used the Community as a scapegoat for their own economic failures. Mr Jenkins agreed.’111 In an earlier conversation in London Jenkins had tried to persuade Callaghan that it was not a question this time of Britain joining an existing mechanism, ‘but of whether Britain should participate in the creation of something new’ and help to shape it. It was a question of national self-confidence. ‘The French instinctively looked to see how they could benefit from EMS, while the British instinctively looked to how it might damage them.’ Callaghan ‘rather sadly said that perhaps that was right’.112 But the upshot was still, when it came to the point, that Britain stayed out. Callaghan explained that he was afraid of being locked in at too high a rate, which would prevent him dealing with unemployment. Mrs Thatcher – in opposition still maintaining the Tories’ staunch pro-Europe line – called his decision ‘a sad day for Europe’. It was ‘a sad reflection on the performance of this Government that . . . the Prime Minister is content to have Britain openly classified among the poorest and least influential members of the Community’.113 Jenkins could reasonably have hoped that if the Tories won the forthcoming election she would reverse the decision. In fact, when he visited her for the first time in Downing Street soon after the election she prevaricated, on the opposite ground that she was afraid of being locked in at too low a rate, which would stop her dealing with inflation; and the longer she stayed in office the more viscerally opposed to joining she became. For the whole of the 1980s Jenkins was left to lament Britain once again missing the opportunity to get in on the ground floor of a European development and then complaining that the arrangements did not suit them, while continuing to suffer from both higher inflation and higher unemployment than any of the participating countries.
‘Without sterling the system is frankly incomplete,’ he wrote in 1980. ‘Without participation, Britain is not playing its full part in Europe.’114 He was also frustrated that the other leaders did not press on as fast as he would have liked to stage two, with the EMF taking on the full powers of a central bank controlling the issue of ECUs. Nevertheless Jenkins was able to celebrate a considerable success which marked the high point of his presidency. By the time he left Brussels he could boast that ‘In a turbulent sea, the Europe of the Community has been an island of exchange rate stability.’115 And for the next decade the system continued to work well, facilitating the creation of the single market in 1986 and the evolution of the European Economic Community into the fully fledged European Union. Only in 1992 did problems arise, when both Britain – just sixteen months after Mrs Thatcher was finally persuaded to join, at the wrong rate and at the worst possible moment – and Italy were forced to leave the EMS. The problem was the anticipated one: that a single exchange rate did not suit all countries equally. Jenkins had consistently minimised this difficulty, believing that maintaining the momentum towards unity was what mattered and that economic differences would be ironed out in time. ‘I believed then, and I believe now,’ he still insisted in 1992, ‘that if you only advance when all the conditions are ripe you never advance at all. Monetary union is more likely to be the cause of economic convergence than the result of it.’116 This was more an article of faith than a reasoned proposition. In his Florence speech and in all his subsequent wooing of European leaders he argued that enlargement of the Community to include Greece, Portugal and Spain made monetary union more urgent – to provide ‘a stronger bone structure’, as he told Raymond Barre – rather than making it more difficult.117, fn10 He clearly foresaw the Europe of the future working as a single economy, in which transfers of resources between richer and poorer countries would be as normal as they already were within countries. ‘Some regions,’ he told Irish ministers in Dublin in February 1978, ‘had large balance of payments deficits’, but this was not a decisive objection. ‘There was already a massive but largely invisible transfer of resources within Member States to cope with this problem.’119 He evidently envisaged the same sort of evening-up on a European scale to enable the weaker economies to live with the same exchange rate as the stronger. But this was utopian, as became clear when the next generation of European visionaries, undeterred by the experience of 1992, pressed on with the creation of a single currency – the euro – without a European Central Bank or a single economic authority to manage it.
By helping to launch the EMS, Jenkins could claim to be the godfather of the euro. It was not his fault that economically weaker countries like Greece and Portugal were encouraged to join the eurozone without meeting the criteria for membership, and then allowed to run up massive debts which they could not repay when the financial crisis struck in 2008. But the EMS and then the euro were intended to promote ever-closer European unity: in practice the euro – by tying the weaker economies into a common exchange rate, preventing them devaluing their way out of trouble and forcing the richer countries to bail them out to stop them defaulting – has sown only recrimination and disunity. With hindsight, Jenkins must bear some of the blame for foisting a flawed vision on the continent before it was ready for it.
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fn
1 In later years he used to claim to have read the whole of Proust in French; but Jennifer was ‘sharply sceptical’ of this claim.3
fn2 Jenkins was influenced by Tickell to take climate change seriously, and by 1988 was voicing his ‘increasing conviction that the planet will be in greater danger by the year 2000 from man’s peaceful activities than from the threat of nuclear war’4 – not, it must be said, that he made it one of his major concerns.