Orders of the Day — Economic and Monetary Union

Part of the debate – in the House of Commons at 6:21 pm on 30th April 1998.

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Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon 6:21 pm, 30th April 1998

We are on the eve of a watershed in post-war European affairs, and there can be no more fitting commemoration of the stunning Labour victory of a year ago than that a Labour Prime Minister should preside over a meeting of the European Heads of State, which will decide which countries will participate in the euro. Those Heads of State will know that our Prime Minister is committed to making the euro a success. There can be no more important decision in Europe today than the decision on which countries will take part in the third stage of monetary union. That decision will be made tomorrow at a meeting presided over, in good faith, by a Labour British Prime Minister.

The meeting is crucial to the future of Europe because the third stage of monetary union will represent a massive deepening of European integration in advance of a widening of Europe to the east. It is vital to the future of Europe that European monetary union be a success. Monetary union is also important to safeguard the gains from European integration made in the past. The previous Administration were strong advocates of the single market. Surely Conservatives recognise, as we do, that the single currency will underpin the economic gains of the single market.

Yet by tabling their amendment, the Conservatives seek to scupper the successful launch of the euro. That is why it is important to state in this debate the positive case for the euro and further monetary integration. The countries that want to sign up to EMU are not doing so just because they have passed the convergence test, important though that is. They are doing so because they can see the positive economic gains that will flow from membership of the single currency. If a common market is good for Europe, let us have a common market that is as complete as possible. In that common market we have a common measure of length, the metre, a common measure of weight, the kilo; and we will soon have a common measure of economic value as well. The justification for the euro is as strong as it was for the single market itself. The removal of transaction costs—changing from one European currency to another—will be a major boost to consumers and to the European economy.

The justification for monetary integration and the euro goes far beyond the narrow though important aim of completing the single market. Since 1969, European leaders have striven to find a system that could bring back some of the stability that was once provided by the Bretton Woods system of exchange rate parities. When that system broke down at the time of the Vietnam war, because it was abandoned by the Americans who had created it and whose dollar was its cornerstone, European leaders looked around for an alternative. That was when the plan for a European currency—the Werner plan—was launched: ironically, at The Hague summit of 1969.

Over the past 30 years, the search for the stability necessary to make that project a reality has proved elusive. As a result, we have lived through a generation, from the oil crisis onwards, of high inflation, persistently high unemployment and high and rising Government debt. Throughout this period the national economies of Europe have proved themselves incapable of managing major international shocks of this kind on their own. A single monetary policy and currency will help them to do so, and we should wish them well.

The euro is the essential element in preparing Europe for the rigours, the pressures and the challenges of global competition. Just as my party has had to, the Conservative party should face up to that challenge. The euro represents a unique opportunity to integrate Europe in the global economy, perhaps as the most powerful economic player on the world stage. At a stroke, the establishment of the euro will see off the currency speculators. At a stroke, the euro will challenge the dollar as the international reserve currency. And at a stroke, we shall have shifted the balance of world economic power in favour of Europe. That is why the euro can and must succeed.

Although economic arguments will be to the fore in tomorrow's discussions, I should emphasise that the implementation of the euro will require political commitment too. It is economically justified, but it will need political commitment to succeed. That commitment has so far been shown to the greatest extent by Germany, which stands ready to give up the independence of the Bundesbank; which action, if carried out, will be the greatest contribution that that country has made to post-war Europe. It will secure Germany's European credentials once and for all. Italy and France may also be able to make such a commitment, and Britain should show the rest of Europe our political commitment to making the euro work, too.

By creating a single currency, we are not creating a single language, identity, culture, or any of the other spectres feared by some Conservative Members. Indeed, Europe has distinguished itself by its diversity, which will continue. But we will be creating a strong base for continued co-operation in Europe, for lasting peace, and for macro-economic stability. Those may secure for Europe a leading position in the world economy, on which basis I commend the reports to the House.