The new European Monetary System will begin, as expected, on January 1, 1979. However, some of the glitter surrounding what would have been Europe's most ambitious step toward unity to date has been rubbed off. At the last minute Italy and Ireland decided against taking the EMS plunge.
The decisions on the part of Rome and Dublin surprised all the delegates who had assembled in Brussels for the December 4-5 EEC summit. The summit was expected to routinely endorse the EMS plan, backed primarily by the Germans and the French. Everyone knew the British were not going to join up, although Prime Minister Callaghan had promised to closely coordinate British fiscal policy with EMS members. In effect, Britain would be a "half member" of the currency alignment.
Other than British reticence, the go-ahead decision on the part of the remaining eight was such a forgone conclusion that the summit was expected to conclude early afternoon on the second and final day. Instead, the summit dragged on fruitlessly for another eight hours.
In the end, Premier Giulio Andreotti of Italy and Prime Minister Jack Lynch of Ireland were unsuccessful in getting the other six to agree to a $3.6 billion economic assistance package they felt was needed to help their weaker, more inflation-prone economies adjust to the strict discipline of the MES currency "snake" (named for the tunnel-like appearance, on a graph, of the fluctuations permitted in the relative values of the member currencies).
The last-minute pullout by Italy and Ireland came as an embarrassment to Chancellor Schmidt, prime mover behind EMS. From all indications, Germany was willing to respond favorably to the Italian and Irish demands, even though these were much larger than earlier anticipated. But as has happened so often in post-war European history, it was France that was the fly in the ointment.
President Valery Giscard d'Estaing stood fast. "This is not a system to hand out money," he reportedly commented at one tense moment during the deliberations.
Giscard was under heavy political pressure back home from the French Assembly to curb any drift toward European federalism. The German plan to expand the Community's regional fund to provide the massive loans necessary to Italy and Ireland didn't stand a chance of passing the French Assembly. The latter had also recently served notice that no increased authority would be given the soon-to-be expanded directly-elected European Parliament.
The Brussels summit thus once again revealed the below-surface tensions of the continent's "Big Two" — Germany and France — even in the light of their unprecedented "convergence" in the last few years in foreign policy. The Wall Street Journal, Dec. 5, 1978 reported: "Underneath the present relationship remain latent French fears of Germany. France has made plain that it's entering the EMS currency plan partly to keep Europe from becoming a Deutschmark zone, as a means of countering Germany's economic domination of Europe — and of France. President Giscard has set France the goal of catching up, in 10 years, with Germany's economic development and power to provide Europe with 'at least two countries of comparable influence.' A Europe dominated by Germany is 'unacceptable,' according to Mr. Giscard. France still fears the prospect of being 'dictated to' by Germany, explains a government official."
The cloud over Brussels which suddenly appeared December 5, must be seen in proper perspective, however. The EMS will begin on January 1, with its strong six members fully in tow. Ireland and Italy are said to be keeping an open door, hopeful of negotiating entry on terms more favorable to their situations. The Daily Telegraph reported on December 7 that "the Irish Republic is having second thoughts about remaining outside the European Monetary System" and that it was "by no means definite that Ireland was opting out."
The EMS, after all, represents a major decision for Ireland, not to be taken lightly. Since Britain is not likely to join up, Irish membership entails breaking the comfortable 152-year link with sterling.
Observers feel that if the EMS does get off to a good start, and doesn't collapse like previous currency "snake" alignments (it shouldn't, because this "snake" has a formidable multi-billion dollars worth reserve fund backing it up}, that both Ireland and Italy will have no choice but to hop on the train quickly before it gets too far down the track. It's either that or be permanently assigned to second-rate status in Europe, at a permanent disadvantage to those who have linked their fortunes to the powerful deutschmark.