European Diary, 1977-1981 (29 page)

The year has been sharply divided into two parts, with the first seven months being on the whole dismal. Since 5 September, the date of the return from the holidays, although there have been setbacks, my sense of direction (provided by EMU) and morale have improved greatly.

 

1978 was the year of the creation of the European Monetary System, and as a result the best of my four in Brussels. The trigger was the fall of the dollar. In October 1977, the month of my Florence speech, a dollar bought 2.30 D-marks. By February 1978 its value was down to DM 2.02 (it went further down to DM 1.76 by that autumn). By the standards of 1987 this was not a precipitate decline. But in the late seventies, when the era of dollar omnipotence was only a decade behind, it seemed like a collapse of the verities. It produced considerable inconvenience as well as competitive disadvantage for Europe. It also confirmed Helmut Schmidt's view that President Carter was abdicating from the leadership of the West. And the German Chancellor was less inhibited about filling the monetary than the political gap, and even better qualified to do so.

On 28 February, at what I expected to be a fairly routine meeting with him in Bonn, he electrified me by announcing his conversion to a major scheme of European monetary integration. What he proposed was well short of full monetary union. But it went about 30 per cent of the way down the ambitious road which I had charted at Florence. It was a wonderful ‘turn-up for the book', a sharp contrast with the attitude of mildly benevolent scepticism which he had taken at the Brussels European Council only three months earlier, and a transformation of the Community landscape. Germany was the one country which could make a reality of monetary advance.

Schmidt normally coordinated his European moves with Giscard. But in the late winter of 1978 the French President was preoccupied with his legislative elections, the first round of which was due on 12 March. He was widely expected to lose his majority and find the second half of his presidency as hobbled as President
Mitterrand's was between 1985 and 1988. This did not happen, but its prospect affected events both by making Schmidt's initiative dependent on the left not winning in France (hardly a signal example of Socialist solidarity) and by making Giscard remote from the very early formative stages of the EMS.

Schmidt therefore used me as his main non-German confidant (and on 28 February he said that he had only two or three German ones) to a greater extent than he might have done if ‘my friend Valéry' had been more secure and available. The question of confidentiality was a teasing factor throughout the incubation of the EMS. Schmidt was a naturally indiscreet head of government. But this did not mean that he liked other people betraying his confidences before—and sometimes even after—he had done so himself.

I am not sure that I was instinctively any more discreet than he was, but I knew what a big fish I had on my monetary union line, and I was certainly not disposed to shake it off with talkative clumsiness. I had the advantage of a reliable
cabinet
(mostly trained in the British Civil Service) and the disadvantage of having to keep in some sort of informal array both the traditionally leaky Commission and six or seven other governments who saw no reason why they should respect secrets of which their big brothers had mostly not bothered to inform them directly. Difficult choices about whether to inform X of what Y had said about Z consequently constituted a slightly comical sub-plot throughout 1978.

Once the EMS was into the phase of discussion between governments it became very much the creation of European Councils. It remains the most constructive achievement, and one which in itself justifies, this early institutional innovation of President Giscard's. One of the main reasons, in my view, why the EMS was able to be so quickly implemented (only sixteen months from Florence, twelve months from my Bonn conversation with Schmidt) was that it did not require a multiplicity of formal, unanimous decisions by the slow-moving Council of Ministers. Heads of government provided the direction and the will, while the central bankers handled much of the detail. Although no one could accuse the latter group (particularly the nodal figure of Otmar Emminger, the President of the Bundesbank) of unseemly enthusiasm, they were at least used to operating informally and quickly. The need for unanimity was
obviated by Britain, the only country of the Nine not to participate in the exchange-rate mechanism, the central feature of the system, simply standing out and not attempting to veto what others did.

The staging points in the fairly rapid journey were Copenhagen on 7/8 April, where under the Council's Danish presidency the purpose and scope of a monetary integration scheme were first expounded to most of the governments; Bremen on 6/7 July, where in the first days of the German presidency the scheme was given a fairly precise shape and it was agreed, with some British reluctance, that governments would study this particular scheme as opposed to ranging all round the intellectual horizon and give their answers at the next meeting; and Brussels on 4/5 December (that next meeting) where, still under the German presidency, the great advances of the year appeared to dissolve into futility at what should have been the exact point of fulfilment. Giscard there became mysteriously sullen, Schmidt became defeatist, and (temporarily) negative answers were received not only from Britain, which was expected, but also from Italy and Ireland, which most certainly was not.

Fortunately, however, the solidity of the previous advances was too great for it all to disintegrate into chagrin and disappointment. The Italian and Irish Governments had fairly rapid second thoughts and announced their renewed adhesion before Christmas. Giscard remained sulky, and held up, nominally on a complicated point of agricultural finance, the inauguration of the scheme which was due for 1 January. Eventually this problem was not so much unravelled as left to dissolve, which process did nothing to explain why it had briefly been given such importance, and the EMS came into operation on 1 March. But this development belongs to 1979. 1978 closed with the system kicking lustily as it moved into its tenth month of pregnancy, but with one of its parents (which Giscard had an adequate claim to be) suddenly cool about its birth. As tends to be the case, such belated coolness was ineffective—except to prevent the child being born
en beauté.

For the rest, 1978 was a year in which enlargement problems were increasingly prominent on the Community agenda. Greece, which I visited in late September, was by far the furthest down the road to entry of any of the candidate countries. It was also in my view the least qualified for membership, but it was too late for that
view greatly to signify, particularly as it was balanced by the high regard which I developed for Konstantinos Karamanlis, then the Greek Prime Minister.

Spain was the most interesting (partly because both the biggest and the one with the strongest tradition of political influence) of the three candidates. I went to Madrid in April, having been to Lisbon the previous November. There was considerable latent opposition within the Community to Iberian enlargement. France was the most hostile, while the Benelux countries were reticent, and Italy uncomfortably torn between Latin solidarity and the rivalries of Mediterranean agriculture. I was firmly of the view that Spain and Portugal met all the three qualifications for membership (they were indisputedly European, democratic—even if only recently—and had a settled desire to join), and that rejection or undue delay would be damaging to them and discreditable to the Community.

Outside Europe my visits of the year were to the Sudan and Egypt in January, to Canada in March and to the United States in mid-December. It was a measure of the dominance of the EMS issue that I went away so little.

In July the Bonn Western Economic Summit took place. There was no trouble on this occasion about my attendance at all the sessions. This Summit was centrally concerned with trying to get an agreement for concerted economic growth. As ten years later, the Americans and most of the others wanted the Germans to expand. Eventually a sensible if not very precise plan was agreed. But it was aborted as a result of the oil price increase which set in a few months later.

The political situation in France has already been described. In Germany politics were reasonably stable. No Federal election was due until 1980 and the SPD/FDP coalition was showing no particular signs of strain. Schmidt/Genscher relations appeared tolerable if not warm. In Britain the Callaghan Government briefly enjoyed its period of greatest stability between late 1977 and the summer holidays of 1978, but subsequently began to look near its end. The avoidance of an election in October 1978 created bewilderment rather than confidence, and even before the ‘winter of discontent' a change of government in 1979 became the general expectation.

The Italian Christian Democrat Government survived the tidal wave of Aldo Moro's murder after kidnapping in April and paddled
along reasonably steadily under the subtle presidency of Giulio Andreotti. Forlani was Foreign Minister throughout the year. Pandolfi, when he became Treasury Minister in March, made more external impact. In the Netherlands there was a fairly sharp political move to the right, with van Agt (Christian Democrat) having replaced the Socialist den Uyl as Prime Minister in December 1977. The new Government was just as easy to work with on European issues as the old one had been.

In Belgium some fresh twist to the communal problem led to the European fame and oratory of Leo Tindemans being replaced in October by the less distinguished but more direct Vanden Boeynants, a multiple butcher from Ghent. Gaston Thorn (Liberal) continued as both Prime Minister and Foreign Minister of Luxembourg. Anker Jørgensen (Socialist) and Jack Lynch (Fianna Fáil) were equally undisturbed at the head of the governments of Denmark and Ireland.

The weather (always a preoccupation of mine) was rather better than in 1977. The winter was briefly severe in February, the summer was tolerable without being noteworthy and the autumn was superb, warm and settled until mid-November, and then cold and settled until into Advent.

TUESDAY, 3 JANUARY.
London.

Andrew Knight, editor of the
Economist,
to lunch at the Athenaeum, the first time that I had been there since being elected a member under their special semi-honorary arrangements. Knight agreeable to talk to and indeed we went on upstairs until after 4 o'clock; he was well-informed about Brussels, though not exactly exhilarating in his appraisal of prospects.

WEDNESDAY, 4 JANUARY.
London.

Kingman Brewster, American Ambassador in London, for a drink at Brooks's at 12.30.1 had not seen him for over five years and not at all since he had been in London, and was agreeably surprised by an approach from him the day before saying that he much wanted to
see me (mainly about European monetary union) during the few days I was in London. Very quick and well worth talking to. Then William Rees-Mogg to lunch. I found William much as always, perhaps ageing a little though he has always looked at least ten years older than he is, and having moved, as he expressed it, somewhat to the right on economic affairs, but politically quite pro-Government: thought Callaghan was doing very well; was detached from but not anti-Mrs Thatcher, and thought the whole prospect for the next election was very open. I did not feel as close to him in outlook as I have done at times in the past.