From becoming into being

Esko Seppänen, MEP, Brussels, 12 February 1997

Three major processes are currently underway in the European Union, and they are all interlinked. They are: 1) the IGC, 2) EMU and 3) enlargement. They promote a federalist mode of administration.

In the EU at present, power, strength and hegemony are with the Socialists and other federalists. A very peculiar alliance is in power, in which federalism and its inseparable concomitant EMU unites Helmut Kohl's Rheinish capitalism with European social democratic corporatism.

Why do we in the Nordic countries have a critical attitude to the formation of a federal state? Because it implies supranational decision-making. It is a retrograde step in the development of our democracy. We have been dependent on central power for hundreds of years: now they are bringing in a new central power for us, which before long they will surely be trying to give it the right to levy taxes. It is impossible for small countries to defend their own interests in supranational decision-making. We in the Nordic countries are more in favour of the EU's current form of administration, a union of free states, than a federal state.

Federalism encourages a process of movement in the EU and is therefore a dynamic force. If a federal state comes into being, the federalist dynamism will cease. At that point it will again be a time of ideologies. We must prepare now for that situation and ask how the federal government can be held together when the movement stops. Is there is danger that the federal central power will be forced to use ever more persuasion, compulsion and violence? Will the central government be faced with Russia's problems?

For the federalists, EMU, the gold standard of the 1990s, is the foundation stone of the federal government and of the Tower of Babel. They are therefore not prepared to change one jot or tittle of the Maastricht Treaty and will not depart from the set timetable. If EMU is not achieved now, it will mean the postponement of the political dimension of the EU, i.e. its development into a federal state.

Both EMU and enlargement have been left out of the IGC. The EMU has been left out because it is claimed that it was already decided on in the Maastricht Treaty, even though, following Waigel's Stability Pact, it is no longer the same treaty that was decided on at Maastricht; the new substance of the treaty has at any rate not been ratified by the Member States' parliaments. Enlargement is not being discussed at the IGC because, if it were, it would be necessary to take account of the changes it would cause to the EU's agricultural policy and the budget, and the IGC cannot cope with discussing these issues. We in Finland have almost 20% unemployment. We do not like being net contributors to the EU budget. Our powers that be may have trouble in getting the nation to pay the price of enlargement.

At the IGC decision-making is being made more flexible. In practice, the question is how the right of the Member States to determine their own affairs themselves can be limited and by what qualified majorities the EU can progress towards a federal government. At the IGC the right of veto of individual countries will at any rate be abolished in many new areas of policy. We must now look to see what the emperor's new clothes look like, and whether there is in fact an emperor inside them.

EMU takes away independence in budgetary policy from the countries which participate in it. I base this assertion, inter alia, on Hans Teitmeyer's statement that 'it must be clear to everyone that monetary union is more than simply a series of technical events. It deeply affects every country's political independence'. I believe that the loss of independence prevents us Finns from pursuing an economic policy appropriate to our country.

The basis of supranational decisions can only be the common interest. What is the common interest? Only when we know this can we take an informed decision whether it is worthwhile for countries to abandon their own economic policy in which they themselves decide on their own interests. I maintain that the common interest is different in different countries! The national economies and social security systems of the EU countries are differently structured, different countries are dependent in different ways on imports and exports of different goods, different areas are different in their natural resources and economic history, and in different countries trade has developed differently for different reasons; in this context there is probably no need to mention the matter of different languages and different cultures.

That being so, there can be no uniform monetary policy for different countries on the basis of which the advantages and shortcomings of a single currency can be shared out equally among all the countries. Along with EMU we must accept the fact that there will be winners and losers. Why should the losers among which I include my own country, Finland, want EMU? It is hard to understand this except as the ideology of a political elite. What we have is social democratic federalism.&127;

I believe that at Finland will be among the losers in the EMU area linked to the Deutschemark because of our own heavy dependence in the US dollar in the pricing of our exports. A single currency would require more federalism from the EU: income transfers through the EU budget from the others to us. However, a start has been made at financial policy convergence not by compensating for difficulties but by standardization and harmonization, which only make the problems worse. These arise when other countries are moulded by political force, by means of the EMU criteria, to resemble Germany. Waigel's Stability Pact means harmonization of the foundations of economic policy without distinguishing between the trade and unemployment situations of different countries.

As far as the common interest is concerned, that of EMU lies above all in taking the achievement of the neoliberal Single Market i.e. the notion of free trade, to its logical conclusion, and in 'stable monetary conditions' and an end to&127; currency exchange charges and monetary speculation between the EU currencies. However, if the world changes and, for example, the US dollar is floated, different adaptation problems will arise for different countries because of the single currency: fluctuations changes in the exchange rate of the US dollar influence different countries in different ways. If the exchange rate with the dollar is correct from Germany's point of view and wrong from our point of view, we then have to find means of adapting ourselves, in the elasticity of the labour market - i.e. by reducing wages - and in financial policy, i.e. by cuts in social security. The price for the common currency will have to be paid in the form of deflation and mass unemployment.

If there is no elasticity in EMU, I would rather change the exchange rates, than reduce wages or worsen social security.

Lowering wages brings about significant structural problems. If the prices of capital goods are determined internationally and are not flexible, and if the nominal values of debts are not elastic but wages are - in a downward direction - the national relationship between the price of labour and capital changes. It changes in favour of capital. In my opinion the Left cannot wish to see such a policy.

The political dimension of the Single Market, besides convergence on economic policy, is that standards must be created not only in the standardization of monetary and financial policy but also in social policy, taxation (especially capital taxation) and environmental prediction. These are the parameters of the Single Market. There is a danger that harmonization on these issues will lead to social and environmental dumping. This is the logic of the market. I am afraid that common standards which are imposed on the conditions of the market will be worse than the national standards because common standards are often determined on the market to the advantage of global capital, just as the international price of capital is now determined.

EMU is a federalist project, and so is the IGC which should be discussed in connection with EMU. EMU and the IGC are two sides of the same coin. At the IGC negotiations will be held on the supranational Common Foreign and Security Policy (CFSP). Under the form of text currently proposed, it will lead to an even greater degree of common defence than at present.

I can see that the enlargement of NATO and the EU is broadly conceived as an operation to isolate Russia. Even the EU needs the image of an external threat to strengthen its own identity, and Russia without mentioning it by name - can basically be used to fill this role. Germany knows this best, and the countries of southern Europe are least aware of it. Unlike any of the other EU countries, Finland has Russia as a direct neighbour. If a conflict comes, which we have not wished for nor caused, but which we will be forced to take part in, we will be in the vanguard.

It is in our interest to have good trade and other relations with our great power neighbour, but the pursuit of independent relations with Russia will before long be contrary to the logic of the EU's dynamic development. The Federal Government will need to have the distinguishing marks of a federal government, including a common partnership for Peace and War, and the federalists will not allow us any lasting exemption.

If the former countries of real existing socialism are regarded as a potential market of almost 400 million people, which is needed for the future economic growth of the EU, we need to ask the question: can the world's nature and environment cope with these countries rising to our level of consumption? In answering this question, one needs to bear in mind the economic growth of China and other countries of Asia which are also becoming a centre of raw materials consumption. When will the battle over the world's resources begin, and where will its front lines be?

The EU enlargement process is not just about the enlargement of the EU but also of NATO and indeed the whole map of Europe. My argument that an attempt is being made to isolate Russia is based on NATO's enlargement to include Poland, the Czech Republic, Hungary and Slovenia. You just have to look at the map to understand why Slovenia is included. If it is included, Russia is also involved.

EU enlargement which leaves out Russia will bring about insuperable problems in the fields of income transfer and agriculture for the whole of the EU. In the new Member States agriculture will become a source of dynamic development while at the same time food prices in those countries will rise to a level which their nationals cannot afford. This will not be our main problem, nor will the fact that enlargement will be funded with current EU nationals' money, but that there will be a single free labour market. The free movement of workers will bring a cheap workforce to the capitalists, whereas at present the capitalists have to go to the cheap workforce.

I think that in the international social democratic movement federalism is excused on the grounds that supranational decision-making will bring about social democratic hegemony in Europe. I believe that they want to use this hegemony to bring better social welfare and social security to all nations. In this respect the social democrats are the social dimension of the development of the EU.

In my view, however, this thought is based on a misunderstanding of capitalist logic, quite apart from the question why the creation of good social security for all should require it to be scrapped in those countries where it already exists.

The logic of the Single Market and EMU is that all countries should be the same. The logic of capitalism is to obtain the highest possible return on capital and pay the lowest possible level of tax. To that end, capital should be able to be imported and exported freely. The logic of the single market brings about this freedom for capital. In this sense the EU is the European dimension of global capitalism, whose highest ideological and value basis is free trade, particularly real time free trade in capital. Capital has standardized products similar in nature, and has no country of origin. Nowhere in the EU does it have responsibility for employment or social security. Its owners are only interested in the return on their capital.

European capital is not threatened by cheap American or Asian capital. On the other hand, the European workforce is threatened by the cheap international workforce, particularly from the former 'socialist countries'. Following the collapse of real existing socialism a cheap labour reserve of two billion people was created on the world's labour market. It is not a threat to the price of European capital but to the price of European labour.

In my opinion the left should fight against the Maastricht Treaty's EMU. It is the capitalists' EMU. However, if EMU comes about, we must consider whether anything should be done to democratize it. The European Central Bank (ECB) is currently being built up, and there are no plans for any democratic or parliamentary monitoring of it. In practice a six-member governing body will be responsible for its activities, and this body will not receive any guidance or advice of any kind from governments or politicians. The French have begun to talk about the political monitoring of the ECB, but this may be only political hot air.

The monetary policy of the ECB will be the fight against inflation, in which the measures of the quantitative supply of money may be used (M1, M2 etc.). These have no significance in practice; they are used only to enable the ECB to jog the Bundesbank's memory. If the ECB makes monetary policy by supranational decisions, this policy will be imposed on the EMU countries from outside. What will happen to us then will be for example what happened to France. It has paid a heavy price for the Germanization of its economic policy in the form of the 'franc fort'. I wonder whether it will be possible to bring the French people round to supporting the current development. The issue is a point of honour for the political elite, but would it be possible to force this line through irrevocably? It is ultimately a matter of the management of the Deutschemark, and the name 'Euro' is only a cover just as Waigel's Stability Pact is beginning to be called the Stability and Growth Pact; it is not about growth but about deflation. I do not understand what France's vision of the future is of future power in Europe if Germany obtains a leading role in monetary affairs throughout the EU. But on the other hand, in place of French gastronomy we now have Hannelore Kohl's new cookbook.

Germany needs some country outside the deutschmark area as an EMU puppet. There are two candidates. One of them is ourselves, Finland, a net contributor to the EU budget, whose political elite is uncoupling itself from its history and geography. The other is Ireland which has already uncoupled itself from England, and which is from our point of view a tax haven and which from our point of view receives a lot of our money into its budget.

Public opinion in Britain may prevent Tony Blair from abandoning the pound. The elections in Denmark and Sweden may at least delay these countries from joining. Greece will not qualify and Italy will not be allowed in, because if they join the Euro would not be the Deutschemark. What is at issue the whole time is what Tietmeyer calls the 'stability culture', and in Germany's view there is more of this in the north than in the south. Spain and Portugal may suffer the same fate as Italy; Germany does not want them in. If they remain outside the EMU, this will be a serious problem to France for reasons of competition, and it is therefore not entirely certain that EMU will come about. If it does, and if the Euro is as strong as the Deutschemark, this will mean the devaluation of the currencies left outside EMU in relation to the Euro. Will the EMU countries' economies cope with that? In my opinion Finland cannot cope with Sweden remaining outside. Will France be able to cope with Italy, Spain and Portugal remaining outside EMU?

Before the beginning of 1999 there will be a great currency upheaval, in which the exchange rates of the mark and the franc will be set. The mark will not be able to cope with the franc being devalued against it, but I believe that France cannot irrevocably join the EMU at the current rate of exchange.

The EU countries' biggest problem is not the cost of money but mass unemployment. It is a structural problem to which no solutions will be found in economic policy or economics.

We on the left cannot build our strategy on curbing unemployment by means of EMU on unlimited economic growth. Growth mainly renews machinery simply by modernizing it.

We must have the courage to carry out a new division of labour, by reducing everyone's working time! This cannot unfortunately be done without reducing every worker's level of earnings. In the past in comparable situations earnings have started off by falling but have then returned to their old levels and then risen. Those on the lowest earnings must be given tax breaks.

As long as countries are different, different countries will need their own economic policies. EMU minimizes our ability to promote our own interests, whereas with independent decision making at our disposal the number of means available are maximized. This is clearly seen in Canada for example. The Canadians do not have the slightest intention of entering into a monetary union with the USA.

If EMU comes, the left will have to reassess the role of the state and the importance of democratic decision-making when the markets take control of social life and everyday politics and take a leading role in people's lives. When politicians cannot get funding for public projects, social security can only be maintained at the rate of the slowest countries. Elasticity of labour and wage cuts are tantamount to a seizure of power by the capitalists. In economic policy EMU will mean going back 60 years to the time when there was as yet no economic policy. It is only 60 years since economic policy was invented. Are we now about to give up this invention?

EMU is not a red or green project. In building up our new left-wing identity, the most important building block in my opinion is reducing unemployment and shortening working time. In my opinion EMU is a project about the value of money but not about the value of people; EMU will not curb unemployment. In the EMU, unemployment is one of the ways in which the economy can be elastic in a situation where EMU itself is not.

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