Towards a European Money System
Whatever difficulties people may meet with in handling the metric currency changes on 15 February the changes themselves will have no effect at all on the main operations of the British monetary system or its standing in world currencies. New names will be given to some old coins, and three new ‘coppers’ will appear, the new 2p, 1p, and ½p but the total amount of ‘copper’ coins, about £200 million, will not be altered on D day, nor will the notes in circulation, about £3,660 Million. One change has however already been introduced which distorts somewhat the Bank of England’s weekly figures of note circulation. This was in November 1970 when £96 Million of ten shilling notes ceased to be legal tender, thus dropping out of the Bank of England’s note figures, having been replaced by the same quantity of the ten shilling (50p) ‘silver’ coins.After D day, as before, the Pound will still have the same exchange rate with the dollar (about $2.40), and with the rest of the currencies inside and outside the European Economic Community.
This does not mean that the changes have no great significance; this will only become apparent some years ahead if Britain joins the European Six and if the Six themselves succeed in setting their, at present deadlocked, negotiations about moving towards a single European currency.
The D day changes are a first step aimed at an eventual situation in which there will be only one currency covering the whole of Europe, just as the dollar covers the whole of the USA and the rouble the whole of Russia.
The 1957 Treaty of Rome which established the European Economic Community (Belgium, France, Western Germany, Italy, Luxembourg and Holland) did not itself provide for a single European currency but only for the co-ordination of financial policies. Since then efforts have been made towards unifying the currencies, culminating in a conference of the Six at the end of 1970 to consider a report drawn up by a committee under the chairmanship of the Prime Minister of Luxembourg (The Werner Report). The conference ended in disagreement but the negotiations will go on.
The Werner Report aimed at achieving a unified currency in 1980, to be preceded by an immediate agreement to re-direct to narrow limits the freedom of the six governments to change the exchange rates of their currencies. The breakdown of the conference took place over seemingly unimportant differences of opinion about the speed of progress to unification (the French government wanted it to be regarded as “a desirable object to be achieved in the long run”); about whether agreement on currency should come before or after agreement on other economic questions; and whether a central institution should be set up to handle the currency; but behind this are deep conflicts of interest of the dominant capitalist groups in different countries.
One basic cause of disagreement concerns the nature of the EEC. It was stated as long ago as 1958 by Professor Hallstein, former West German Foreign Secretary and President of the Common Market Commission:
We are not in business to provide tariff preferences or to establish a discriminatory club to form a larger market to make us richer, or a trading block to further our commercial interests. We are not in business at all, we are in politics.
What Hallstein meant was that the aim was the creation of a Europe governed by a European government, an aim to which the French government has all along been opposed. Its relevance to the question of a single European currency is that it is impossible to have a single currency without a central government to control it. As Samuel Brittan put it in the Financial Times (16 November 1970):
Monetary union and a common currency imply a common Budget, political union and some form of European Government.
This is not just a disagreement about some abstract question of “National sovereignty”: underlying it is the conflict of interests between the trading position of high cost French industry. In the past ten years prices in France have been rising half as fast again as prices in Germany—enough to make many French products uncompetitive in European and world markets. The remedy was to devalue the franc by 11 per cent in 1969, equivalent to a reduction of price of that amount to foreign buyers of French goods. German exports were booming to such an extent that in the same year the German government was able to raise the exchange rate of the German mark by 9 per cent and still hold most of their markets.
The fear of French capitalists is that a centrally controlled unified European currency would be dominated by German interests with their much stronger industrial and financial resources. Even the interim scheme proposed by the Werner Report, with its restriction of changes of exchange rates to 1.2 per cent up or down, would rule out any further effective devaluation of the franc.
The position of British exporters as regards the abnormally rapid rise of costs and the need to resort to devaluation of the pound (the devaluation in 1967 was 14 per cent) is similar to that of the French. Yet the Chancellor of the Exchequer has pledged the Heath government to accept whatever currency arrangements the Six accept before the entry of Britain into the EEC. Hence the determination of the Heath government to curb the rise in prices, and cut costs of production through the campaign against “excessive” wage increases.
It remains to be seen what sort of compromise the Six will reach about immediate currency arrangements and about the date of an eventual unified currency system for Europe.