Orchestrating Europe (Text Only)

Four deep modifications occurred in this period. The quality of EC governance improved, thanks very largely to better implementation and enforcement of the law; the financial sector became freely involved; competition policy was made congruent to the assault on intangible barriers to the internal market; and officials began to conceive of policies for industry, trade, social affairs and competition as a whole. In this sense, the internal market cut off both commercial players and their governments from the frustrating recent past.

5 (#ulink_73445a33-078e-55b8-984d-1290c77ff5e4)

Maastricht and After, 1988–93 (#ulink_73445a33-078e-55b8-984d-1290c77ff5e4)

The West German Presidency in the first half of 1988, and especially the Hannover Summit in June, appears in retrospect even more significant than it did at the time. Not only did that Presidency oversee the conclusion of many of the EC’s long-running battles, such as that over the abolition of exchange controls by France, Italy and Spain, but it witnessed what Arthur Cockfield called ‘the irreversible acceptance’ by member states of the single market. It also settled the budget saga for the succeeding four years, after one of the most prolonged and divisive crisis in the EC’s history, which had ramified into the CAP, now that France had become a net payer; and this, despite protests by the Länder governments and German farmers that Germany was already paying too much, and would pay more once ‘cohesion’ had been incorporated by the coming Inter-Governmental Conference (IGC).

The Hannover Summit confirmed Delors’s second term of office from 1989–93, with British approval (Helmut Kohl having failed to put forward Martin Bangemann’s name, despite its being ‘Germany’s turn’, because of a political trade-off with the Free Democrats in Bonn). Delors would also chair the Central Bankers Committee which was to recommend rules for operating the future European Bank. Coming after a number of minor but irritating disputes over the CAP and the purity of beer, these achievements suggested that the Franco-German understanding had been enhanced. Insofar as there remained arguments, these were internal: the first being between Chancellor Kohl and Foreign Secretary Genscher about how to react to the Gorbachev reforms in Russia, and the second between the Bundesbank and the Bonn government over EMU.

But Hannover also demonstrated how consistently Germany (shortly to be reunited) would react when external events forced it to engage in the international domain. Whatever the different approaches to Ost- and Westpolitik advocated by Kohl and Genscher, Germany’s political elite was still agreed that ‘the coming Germany’ had to be embodied and understood in its European dimension, that is, within a European political union. From the 1985 IGC to the next, at Maastricht in 1991, this basic line did not change.

What did change was firstly that Germany’s advocacy of political union acquired a novel assertiveness, which tended to undermine French certainty of how the dual understanding would operate in future. Secondly the grounds on which the French, led strongly after an initial period of reluctance by Mitterrand, would seek to redefine the partnership also changed. It is perhaps necessary to emphasize the French government’s increasingly urgent search for monetary union, even more than the German desire for political union. The Mitterrand-Kohl agreement to balance the two, in order to retain their informal parity, despite Germany’s increase in size and status as a result of reunification, and to bind this new Germany firmly into a deeper, as well as larger Community, was to be the single most important phenomenon between the two IGCs. Neither that nor Maastricht would have happened without French fears of what a united Germany would otherwise become.

The price, on France’s side, was political union; on Germany’s it was monetary union. After Kohl’s about-turn on EMU to meet French demands in 1988, the German government (though not the Bundesbank) showed itself positive about the common currency even though it would involve losing the deutschmark – that is, so long as the new one was based solely on principles of economic stability and was managed only by the new Central Bank. Fluctuations in their relations continued, of course, at diplomatic levels: however these were repaired by the Kohl-Mitterrand proposal to have a second IGC on political union, made in April 1990 before the Dublin Summit, and strengthened during that IGC where foreign and security policy, and later European defence, were concerned. Much less consensus was obtained about EC institutions’ power, for elite German opinion valued an increase in the European Parliament’s democratic functioning so highly that the government tied it to its consent to EMU, as the only way to defuse domestic hostility to the impact of Monetary Union on the deutschmark.

From the French point of view, these attempts to tie EMU to Bundesbank management criteria, and to strengthen the Parliament, could be made acceptable if Germany were induced to accept a fixed schedule of progress leading from the ERM to complete monetary union on France’s terms. The French government also hoped that the Common Foreign and Security Policy (CFSP) could be extended to cover defence but on French, rather than NATO, terms: Mitterrand wisely gave instructions not to raise this question too early on. A substantial reordering of France’s domestic priorities would be involved in approaching the question of political union, but not of a size to require major or public changes in the machinery of French government.

All this contrasted sharply with the British case. Margaret Thatcher’s last two years were increasingly overshadowed by her belief that a grand conspiracy had come into existence, manoeuvred by Christian Democrats, renegade Socialists and the Commission led by Delors, with the aim of imposing Brussels’ sovereignty on a permanently embattled offshore island. But whatever her forays may have gained tactically in 1988 and 1989–90, they were mostly pyrrhic victories ending in acquiescence, for lack of allies. Meanwhile, on the domestic front, she was gradually manoeuvred towards acceptance that Britain should join the ERM by an entente between her chancellor, Nigel Lawson, and the foreign secretary, Geoffrey Howe, which, for lack of a true cabinet majority, she was unable to rupture.

On top of this came German reunification which she vigorously, and probably unwisely, attempted to delay by enlisting Mitterrand’s support during his period of uncertainty of how to react – as if a French president with his personal background had not been aware of its implications. Such tensions had already showed themselves in her speech at Bruges on 20 September 1988 – which became celebrated in retrospect for the tone of its delivery and its reception by the Conservative Eurosceptics rather than its actual content – accepting ‘Britain’s destiny is in Europe as part of the EC’ (but an EC that was imagined as a commonwealth of free independent nations working in harmony together, with a free trade policy covering the whole of Europe.) The text represented a modification of what she had herself accepted in 1985–6 but was consistent with a more general ‘Anglo-Saxon’ view that the EC was essentially an economic vehicle.

Like so many of Margaret Thatcher’s deep-rooted beliefs, these fears rested on a basis of evidence which was inevitably heightened and distorted by her personal perceptions, now ingrained in a long-running administration.

She encountered other EC heads of government only at summits, and had become isolated, largely because she no longer listened to the complex skeins of Whitehall advice. She was aware of this isolation, aware also of the strength of the EC majority, how her tactics often united them against her, and perhaps of how much less Britain counted with the United States under President Bush than it had done with Ronald Reagan. Yet she seemed unwilling or incapable of acting otherwise than Napoleon in his last campaign of 1814, winning many of the tactical battles but sliding to long, remorseless retreat. She was unwilling above all to examine her lifelong preconception about what ‘Germany’ really was.

No such inhibitions restrained the Commission after Delors’s second term began, though he was to be dogged, in the press of several nations, by his assertion that by the year 1998, thanks to the Single Act, 80% of economic, and possibly fiscal and social, legislation would emanate from Brussels. This claim seemed to be heightened by Delors’s address to the Trade Union Conference in September 1988, which Thatcher used to justify her neo-Gaullist defence of national sovereignty – so long at least until the rest should have considered more carefully where all this would lead.

The Commission, of course, had considered carefully, as the whole edifice built on the 1985 White Paper demonstrated. But it could not control how its proposals to the Council would be interpreted outside, in the press and on television in the twelve member states. British politicians could argue that in implementing the single market programme, the Commission often acted by stealth or resorted to rarely used powers such as Article 90, to force member states to open their telecoms markets to other EC competitors.

Views like this derived from evidence of various kinds: Commission documents such as the internal guide on how to infiltrate the mass of single market legislation through Coreper and the Council of Ministers; or the steadily increasing agenda of items contingent on the internal market. Delors’s campaign to represent the EC, not only at G7 meetings but at all functions dealing with external trade and GATT, appeared to aggrandize the Commission vis-à-vis member states. Indeed the Greek Presidency’s rather presumptuous initiation of direct talks with the Soviet Union in 1988, as if ‘representing the EC’, can be seen as a small state’s rejoinder; one that was reiterated by the Spanish Presidency early in 1989 over trade with Japan. That the Commission did retract, as it had done often in the past, on some of its more contentious positions in order to take a more emollient line, was less often remarked.

For example, concessions made by Delors and Christiane Scrivener, the Commissioner responsible for taxation, on VAT harmonization, which the British in particular had resisted, appeared in any case to accrue to the member state holding the Presidency, or to the European Parliament. In strategic terms, a grand design clearly did exist by 1989, on which the Hannover Summit’s accord allowed the Commission two priceless years to expand. But this might have happened in any case, without the Commission’s driving force, since preoccupation with Euro-sclerosis did not automatically vanish in 1988. It was certainly accelerated by the entry of financial institutions as significant players, and employers’ determination Europe-wide to use the internal market’s four freedoms firmly to re-establish managerial rights and enforce further deregulation of wages, security of employment and conditions of work, to the inevitable detriment and dismay of trades unions.

The Commission, led very strongly by Delors during the period 1988–91, provided a focus for what might otherwise have been diverse activities. Delors’s speeches and the agenda he outlined each January to the Parliament increasingly embodied a particular view of the inexorable unity of economic and social spheres; put simply, that EMU and the Social Charter should run in tandem. The argument that the EC needed a new deal (with undertones of Roosevelt’s New Deal) to safeguard concertation (as long as that had genuine economic content) and to give some hope of a return to full employment, required the Community to examine training and education, technology and structural cohesion, together with redress for unemployment and support for the areas of late 1980s industrial devastation.

The embryo of an EC-wide supply side policy contained a built-in presumption that, while post-War neo-Keynesianism may have been misguided, the answers that Keynes had provided were not.

Whether interpreted as a compromise between the requirements of financial and industrial capital or as an innovative response to the EC’s uncompetitiveness, the Commission set out a strategy in which industry, trade and social policies complemented each other in the search for adjustment in a guided, not a wholly open, market. Some of its manifestations are discussed later: industrial policy and trade, competition, and state aids, monetary union (which depended on member states reforming their public finances according to selected convergence criteria) and the Social Chapter.

The existence of such a massive agenda, unprecedented in the EC’s history, represented a drawing together of many disparate strands of policy-making within different Commission Directorates, by an unusually powerful and comprehensive direction. Given a second term of office as President, for the first time since Hallstein, Delors made clear what he intended in his speech in January 1989 to the European Parliament: ‘History’, he declared, was ‘knocking at the door … it will not be enough to create a large frontier-free market nor … a vast economic area. It is for us, in advance of 1993, to put some flesh on the Community’s bones and to give it a little more soul.’

Naturally enough, each Directorate strove for a greater role in this grand design,

which in turn contributed to demands for greater competence by the Commission, and also by the Parliament. The appearance, as much as the reality, affected member states’ perceptions, so that ‘Delors II’ became for some a synonym for aggrandizement.

Answers to the question whether Delors did in reality overstate the grand design in the second Presidency, depend on when the estimate is made. At the time of Hannover, the build-up was incomplete. But in 1990–91, the run-up to Maastricht paralleled the final run-in of the single market programme, together with the waves of legislation from the Single Act itself, then going through every member state’s parliament. The popular press and public opinion in member states only woke up to this concatenation in 1991–2, and there was a very widespread reaction which fed through during the process of ratifying Maastricht and EMU (which was itself a follow-up to the SEA).

But for the political elites in each member state, and the Brussels milieu, the Delors peak came a year earlier; the factor which merited blame was that the IGC was ill-conceived, badly prepared and badly conducted, not on EMU, but on the political side. There was, for example, no central EU body like the Spaak Committee and no think-tank to prepare what actually went on at Maastricht; ministers went into the negotiating chambers often without full texts, in a changing set of circumstances. But the fault lay not only with the Commission’s excess of zeal to get everything included: ministers were equally over-ambitious, for instance in their desire to merge CFSP and defence.

Spain’s entry in 1986 also introduced a novel element, for Spain rapidly became not only a major beneficiary but an increasingly adept player. The Gonzalez government focused on a narrow set of aims, clearly intending to take its place alongside the existing big four

– an outcome which seemed to have taken place after Spain joined the ERM in 1989, but above all in the triumphal year 1992 of Expo-Seville, Madrid’s tenure as Europe’s cultural capital, and the Barcelona Olympic Games.

The Spanish phenomenon also highlighted what was initially a less obvious part of the grand design: the extension of regional funding from a policy of subsidizing poor areas, such as Italy’s Mezzogiorno and most of Greece (often without tangible returns), to one by DG16 intended to raise the standards of infrastructure, production, investment and commerce to those of the rich core. This gave the well-organized, politically articulate regional governments in Catalonia and northern Italy their cue to ask for political as well as financial recognition when the IGCs began work.

Member states’ consent for the agenda and the Delors II agenda budget which was to pay for it depended on resolving a string of apparently unrelated issues in the two years before Maastricht. This was the harder to deliver since the Twelve no longer grouped in broad agreement, as they had on the Single Act, but divided into aggregations, northern or Mediterranean, large and small, rich and poor, those with great bargaining skills and those with less. Generally in this period it suited the ‘northern’ members to appease Mediterranean demands – in short for Germany to pay. Delors’s appointment of three liberal-minded Commissioners to the principal jobs in January 1989 (Leon Brittan to DG4, Martin Bangemann to DG3, Frans Andriessen to DG1, while keeping the protectionists Manuel Marin (Spain) at Fisheries, and Vasso Papandreou (Greece) at Social Affairs) may have encouraged them to do so.

The two principal issues need to be treated separately: monetary union first, then ‘political cooperation’ (foreign policy and defence), together with the whole area of the ‘interior ministry matters’ – policing of borders, cooperation on crime, terrorism, drugs and illegal immigration – which came together as a result of much wider developments in Europe and ‘near-Europe’. All were, of course, contingent on achievement of the single market. But the Commission could integrate the agenda and take a leading role only on the first of these; the other two touched on member states’ sovereignty far more directly and had to be argued out by ministers and heads of government in the context of a Europe that was changing, after the collapse of Soviet power, more rapidly than at any time since establishment of the ‘Peoples’ Democracies’ had cut old Europe in two in the late 1940s. Even France and Germany could not agree on the details of so wide a range.

On both aspects, the Commission lacked the force to recreate the coherent agenda that had been given it earlier by industrial and financial organizations in Brussels and member state’s capitals during the single market negotiations. These players did not lack interest, but they tended to dispute the agenda among themselves, with those expecting advantages in the internal market facing up to the still-protected national champions, secure for the present in their state aids and government procurement contracts. On the question of Japanese car imports for example, the old peak organization actually broke up, to reform itself under a new title and without one of France’s leading producers (see chapter 10 (#litres_trial_promo)). Apart from these relatively novel rivalries, firms and financial institutions were already deeply engaged in preparing for 1992’s consequences – to which monetary union seemed a remote adjunct; main boards were more concerned with the wave of mergers and acquisitions which reached its apogee in 1988–90.

Organizations such as ERT and the European Committee of AmCham still argued the industrial point of view, especially on monetary union, but managements across Europe did not seek direct inputs to the IGC and appear not to have followed their course in detail. They reacted to the post-Maastricht crisis as if the world had changed little since the Single Act. The ERT, which did succeed in getting some of its ideas into the Maastricht texts, continued to publish pamphlets such as ‘Rebuilding confidence, an action plan for Europe’ (December 1992), which prescribed neo-Keynesian remedies for revival and employment, with talk of ‘concerted action’ and ‘strong leadership’ by governments in partnership with industry, as if the 1988–90 harmony between member states still existed.

The agenda for the IGC was very much more complex than in 1985 because of the range of issues it had to consider, and the diversity – often incompatibility – of outlooks among member state governments. Heads of government and the Commission, often as rivals, therefore developed the agenda at one remove from the corporate players (who restricted themselves to monetary union and its consequences), and at several removes from national parliaments, media and the public. As a result, the long-running process was shaped by bargains, trade-offs and concessions which were different in kind from those of the internal market IGC in 1985. This may not have been intended to be an evasion of public debate, for many of the issues genuinely appeared too complex to explain in straightforward language, or were too confidential. But what, in retrospect, seems a clear failure of all those in the negotiations to educate their publics, meant that the new treaties, launched in 1992 in very altered circumstances, would shock public opinion – notably in Denmark, France and Britain.

There is no need to re-tell in any detail the Soviet Union’s collapse, the failure of former People’s Democracies (which began when Hungary opened its border with Austria to East Germans fleeing to the West and ended with the collapse of Communist authority in Prague and breach of the Berlin Wall on 9 November 1989), nor the reunification of the two Germanies. But all three events conditioned everything that happened in Europe thereafter. They affected EFTA, as Sweden and Finland reacted both to the removal of a forty-year-long threat and to the new-found independence of the Baltic States and Austria, with the return of growing normality, to what had once been Habsburg dominions. Above all they affected former West Germany and France, the EC’s central nexus, because the implications of a united Germany encompassed all the other eleven. The break-up of Yugoslavia, the collapse of Christian Democracy in Italy, and the undermining of the political right in Britain can be traced to the same origin, as can the growth of largely refugee immigration through east and south east Europe’s porous borders, with its direct consequences of racism and xenophobic nationalism.

In the years 1989–93, many of the vestiges of post-War settlements, in welfare programmes, industrial relations and state benefits, also died. Each country described its own parabola of declension: the new – or perhaps nineteenth-century Liberal – thought, first enunciated by the new right in Britain and the United States, passed through a sort of contagion, causing questioning, then fiscal and moral panics, and finally a scaling down of promises and expectations. The true fiscal crisis of European states, heralded in academic literature in the early 1980s, burst a decade later. Coinciding with disillusion after Maastricht, it had a corrosive effect on what remained of late-1980s’ aspirations.

Four Summit meetings stand out as markers on the road from Hannover to Maastricht. The first, in Madrid in June 1989, brought together the Delors Committee’s report on Monetary Union and the first draft of the Social Charter. The meeting was noted for Nigel Lawson’s attempt (speaking for a divided leadership) to be explicit about the terms for Britain to enter the ERM, though his government opposed both EMU at any point beyond stage I and the Social Charter. Defeated on the question of whether to have an IGC, and reduced to near-isolation by the accommodations between the Spanish Presidency, Germany and France (which had been made explicit in the Kohl-Mitterrand letter in favour of political union) Britain had to accept not only the IGC but EMU stage I in July 1990.

At the next Summit in Strasbourg in September 1989, with overwhelming support from the Parliament and smaller states such as Belgium, the French version of monetary union was accepted, with a date for that IGC (but not for the one on political union) after the West German elections and under the Italian Presidency at the end of 1990. Mitterrand had won his second seven-year term in 1988, and although his narrow Socialist majority forced him to govern with centrist approval, he had the firm support of his finance minister, Pierre Bérégovoy, in a period of stability, growth and falling unemployment – which he used to get the European Bank for Recovery and Development (EBRD) off the ground, with his protégé Jacques Attali as head. By then, the Commissioner for Social Affairs, Vasso Papandreou, had seventeen draft directives ready on all the aspects of industrial relations and conditions of work which had been stultified since the early 1970s.

The third meeting, in Dublin in June 1990, took place very much in the shadow of the Franco-German commitments to common foreign and security policy and to a second IGC on political union set out jointly by Kohl and Mitterand in April. The Irish prime minister Charles Haughey capitalized shrewdly on Ireland’s affinity with France, which was seeking to strengthen the European Council, extend QMV and inhibit the pretensions of the Commission and the Parliament. This also suited Helmut Kohl, whose government was prepared to pay the price so long as political union could be kept in tandem with its monetary counterpart.

Once again, the British Cabinet hesitated on the margins, its prime minister profoundly uneasy at the implications of the Kohl-Mitterrand agreement which had been made without consultation with either NATO or their EC partners. That lack of consultation had offended other governments as well: however the weight of the Franco-German entente lay heavy on them all, and was on the basis of this declaration that EC foreign ministers prepared for Dublin and its sequel, the summit in Rome, which to a large extent set the IGC’s agendas. All Thatcher could do, given Britain’s eleven to one minority, was – sensibly enough – to veto a Franco-German proposal for a large dollar loan intended to prop up the collapsing Soviet Union.

Italy took over the Presidency in July, before the Conference on Security and Cooperation in Europe (CSCE) meetings with the Soviet Union. Soon after, Giulio Andreotti became prime minister (Craxi having destroyed de Mita’s liberalizing government of 1989, together with the DC’s reformist programme which, in retrospect, was Christian Democracy’s last chance to save itself from shameful eclipse). Under his direction, the principle of two concurrent IGC’s for monetary and political union was established. After careful consultation with the German and French governments, Andreotti proposed a special ‘informal’ Council, to meet in Rome in October: his intention being to agree a target date for EMU stage II in 1994, with a further wide-ranging IGC the following year.

So hot was this pace that the Italian leader’s motives need analysis. It has been argued that, with the help of his own MEPs and other Christian Democratic parties, Andreotti set a truly Florentine trap for Margaret Thatcher, while her attention was diverted by the July G7 meeting in Houston and by GATT negotiations, so that she went largely unprepared into the October special Council.

Certainly her political nemesis was welcomed widely across the EC – in what one French diplomat described as a mood of soulagement. Yet there is no evidence among member states, whose policies were much more finely balanced than their leaders’ statements usually allowed to appear, of a desire to marginalize Britain. Concessions on stage II, and even some consideration of the chancellor of the exchequer John Major’s ‘hard ecu scheme’ had not been ruled out. But the Italian coalition was committed to transferring power to the Parliament. Andreotti may also genuinely have been concerned that the agenda for December was too vast for one meeting, since he attempted to agree much of it in advance at bilateral meetings and in the encounters of Christian Democratic parties in the late autumn. The German government had agreed not to bring forward the subject of the next set of GATT negotiations, hoping thereby to avoid antagonizing France (whose farming lobby passionately opposed the Blair House Agreement), while helping Andreotti’s fragile pentapartito administration. The German government’s concession of a firm date for EMU stage II, made during the October special Council, certainly strengthened France’s tentative acceptance that the two IGCs on monetary and political union should coincide.

Some of this can be ascribed to German and French governments’ calling in of past favours to Italy. But Italy also provided a skilful chairmanship which falsefooted British and Danish opposition. There was no discussion of GATT. Instead, proposals on political union and EMU stage II for January 1994 were confirmed, in advance of the IGCs. Thatcher had failed to seek alliances for her point of view and found no support except from Ruud Lubbers of the Netherlands.

France and Italy emerged with their governments’ main aims agreed. The real winner was Helmut Kohl who had been hoping for an uncontroversial reunification after the successful East German elections in March, and before public opinion during the West German elections began to question the terms. At the year’s end, Germany in effect paid for USSR approval of reunification and the new Germany’s continuing NATO membership with a massive hard currency sum to cover the withdrawal of Soviet troops from the former East Germany. In the same month, the five new Länder were absorbed in the enlarged Federal Republic, under Article 23 of the 1949 Basic Law; and once Kohl belatedly acknowledged the existing Polish border (cutting off the original pre-1914 East Germany for ever), the Soviet Union was excluded from central Europe for the first time since 1944.

The fact that the two IGCs which began after the Rome meeting were to be concurrent, starting under the Luxembourg Presidency and ending under the Dutch one at Maastricht a year later, did not imply that they would resemble each other. The one on political union and Interior Ministry questions remained very largely a matter for inter-governmental negotiations. The question of monetary union involved the Commission to a far greater extent, and its influence permeated many of the texts. But the two were intimately linked, as Andreotti had argued; at the same time, the agenda was complicated by the issue of the reform of EC institutions, and by cohesion and the budget cycle after 1992 (which was essential for future cohesion funds), together with the Social Chapter, to which both were closely related.

I. EMU

The EMU IGC’s history is inextricably linked to that of the ERM.

Even though the Single European Act stated the goal of eventual monetary union, nothing precise had been set down or accepted on the detailed matter of how transition to a single currency would take place, or when, or the shape and rules of the eventual European Central Bank which would administer it. The devil lay in precisely this detail, for which the ERM provided the only non-theoretical guide. Yet the ERM was the product of a very different conception, and had been disputed during its ten-year course between France and West Germany. The conclusions on which EMU’s architects would build were to become further confused by the entry of Spain and Britain.

The EMS had been created by decisions of the Council. But the ERM was formally an agreement between central banks (and therefore not part of the Community). Yet it had always had a high political content, whatever its economic effect on the economies of participants; and in that sense was to be compared not with the Gold Standard, as it had operated in Europe in the four decades up to 1914, but with the Gold Standard as governments rather than central banks had manipulated it in the 1920s.

Having been affected principally by movements of the French franc during the frequent realignments of the early 1980s, the ERM had been mistrusted by the Bundesbank for reasons expressed during Otmar Emminger’s tenure of office. But in the years after the French economic grand tournant of 1983, the ERM became a DM zone. Mitterrand and Delors, as his finance minister, took a decision which was politically strategic, as well as economic – a decision followed in due course by the Belgian and Danish governments and rather later by Italy and Ireland. For four years, in what can be seen as its ‘classic period’, the ERM rested on the Bundesbank’s credibility, together with West Germany’s willingness to behave as if the DM were indeed the anchor currency; and it achieved a generally accepted and widely welcomed reduction of inflation and state borrowing among members. It thus served as the monetary agency for what were becoming accepted concepts of prudence and discipline, necessary components of economic restructuring. Whether or not causation actually worked in this sequence is another matter: the gains appeared, at a time of rapid growth, to justify the sacrifices in output and employment that accompanied it.