Date: Mon, 06 Oct 1997 23:51:06 +0100
From: Chris Burford <cburford-AT-gn.apc.org>
Subject: M-I: Britain into the EMU


Another major political shift was signalled in Britain when a single lead
article in the Financial Times on Friday 26th September led to a surge in
the Stock Exchange and a fall in the exchange value of the pound against
the DMark of 8 pfennigs. 

It was a report of a shift within the leading members of the Labour cabinet
whereby Robin Cook who is known to be cool on Europe, had moved closer to
the position of Gordon Brown who  is more consistently Europhile. Cook, who
as Foreign Secretary, will be in the chair at a number of important
European meetings for the six months from January, when it is Britain's
turn to preside, had been persuaded that it would be be more possible to
play a creative role if Britain was to agree in principle to join the Euro,
with the date to be determined later.

The analysis suggested that it was again a technical matter to reconcile
the different stages of the economic cycle of Britain with Europe. Britain
near the top of its boom needs high interest rates to avoid overheating, in
comparison to sluggish Germany with low interest rates. This being one
reason for the relative high price of the pound, which is currently
damaging British exports. And hence the odd and decisive vote of confidence
of the Stock Exchange with a surge coupled by a fall in the value of the
pound on the assumption that entry into the EMU would have to be at a
parity below the current, thereby implying a fall in British interest rates
sometime in the next year or two.

But who had successfully manipulated the markets? There was muttering that
Gordon Brown,
currently reported to be the most popular Chancellor in British history
(with an approval rating of 70%) had been leaking. A more informed analysis
later by the BBC traced the source of the story most instructively to a
working breakfast with businessmen hosted by Tony Blair a few days earlier.

Blair had invited a wide range of business leaders and gave every
appearance of wanting to hear what they said. While as a group the
consensus was on the importance of converging with the EMU, what is
particular interesting from a marxist point of view is that the group of
capitalists who spoke up most decisively were the transnational companies
who had invested substantially in Britain in recent years. They made it
bluntly clear that a failure for Britain to move into the Euro would lead
to a reduction in inward investment. The implication was that Blair got the
message.

Blair appears genuinely to have kept to the letter of his view that he has
an "open mind" about the Euro, but the shift of emphasis apparently
occurred here, and by the Friday get applified in the Financial Times
article and the Stock Exchange gave its own instant referendum result.

Last week's Labour Party conference gave no platform for dismay at this
shift of the Labour Government to a more positive Euro position. The dog
did not bark. The dog knew his master.

Today's Financial Times is almost as interesting. The lead article warned
"UK public still hostile to Emu, survey says - Blair seen as facing an
uphill struggle in single currency referendum". 61% of UK residents oppose
European monetary union. The article analysed the possible timing of a
referendum, on the assumption that the Labour government would want to
achieve entry not later that 2001.

The positioning of the article was the nearest the Financial Times could
get to calling for funding contributions for the mass campaign that will be
necessary to shift public opinion.

Inside, an article by Paddy Ashdown, leader of the Liberal Democrats
directly opposite the leader page, entitled "End the Emu Paralysis"
presents a remarkable agenda. A coalition of big business, the Labour
Party, the Liberal Democratic Party, and the Trades Union Congress
(overwhelmingly pro Europe under John Monks leadership, unlike the unions
in Germany), will carry this major economic change through.

It must be a matter of time before an all-party working group able to
assemble funds, is brought into being. Ashdown notes that according to the
CBI only 1 in 20 businesses are against Britain entering the Euro. 

Another article notes that despite the attempts by the Conservative Party
at its current conference to appear united, Conservatives will be allowed
to campaign for Europe in a referendum. Thus whatever the risks for the
Labour government in a referendum, there may be even greater risks for the
Conservatives of being wrecked for a generation. And furthermore as the
government has to face the hard choices of its very limited spending
options, one of the most attractive would be a windfall reduction in the 9%
of total spending that goes on servicing the national debt, if interests
rates fall, as they would with Euro entry.

With the Conservatives putting the emphasis on cutting out sleeze it
becomes clear what a shallow class base they have as their core supporters.
The major economic interest groups are in favour of reaching an
accomodation with Europe. 

The referendum has already taken place, the referendum in the money
markets. The consitutional referendum has merely to follow at the right
time, and with the right manipulation. Economics in the first and the last
instance will be the decisive factor.

Chris Burford

London.



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