A theoretical account of this issue must be able to provide answers to at least three key questions? First, what should we mean by the term "undermining"? Secondly how should we define the nation state? And finally, what should we understand by single European Currency? For an appropriate answer to the questions above I consider to be necessary to slightly redefine the main question of this essay, to outline and explain all the main steps which will finally lead to the last phase of European Monetary Union called single European Currency and also to explain the object and purpose of the nation state in the end of 20th Century in Europe. In a Conclusion of this essay I would like to summarise all the ideas and points which were stated here and at these grounds take a final statement. In this statement this essay will try to prove that there probably is a specific loss of sovereignty -or better national autonomy- for the nation state, but it is not substantial, and using the phrase "undermining" the concept of nation state is not the right way how to formulate this problem.
Term "undermining" as a key term of this essay
The term undermining is comparatively often use in relation to single European Currency.1 But the exact meaning of this polysemous word is a bit indefinite? The synonymous words in this sense are counteracting, sabotaging, subverting and weakening.
According to the wording of this essay, the only one applicable synonymous word is weakening. So "underming the concept of nation state" in our sense is about the "weakening of the position of the nation state".
Single European Currency (from EMS to EMU)
European Monetary System
The history of European monetary integration is based upon three3 major initiatives. Second initiative comes from December 1969 Hague summit, where EC leaders4 called for the study of further steps toward economic and monetary union. This resulted in so-called Werner Plan (1971), which proposed a three stage of process of closer monetary co-operation leading to the full EMU. This plan also never really got off ground but was instead quickly overwhelmed by the consequences of international and monetary disorder. Despite the failure of these initial attempts to achieve the EMU, by the late 1970s there was a renewed interest among European governments in monetary co-operation, which finally led into what was essentially a D-mark block.5 Within couple of next months the formal agreement of establishing of EMS was reached in December 1978 at The European Council in Bremen. This system created the European Currency Unit (ECU) as an accounting currency or credit instrument. The final initiative was then called the Delors Plan for Monetary Union. The creation of all these initiatives were motivated mainly by the requirement of the existence the stable economic currency as a response to international currency crises or challenges.6 The last event was motivated, in part, by deliberate decision to "relaunch" European integration, and by new enthusiasm about the idea of New Europe.
The European Monetary Union
The contents of Jack Delors plan were endorsed by EC leaders at a June 1989 summit in Madrid, although Britain's Prime Minister Thatcher expressed strong reservation. This plan envisaged three-stage process leading to full monetary union. And making concrete proposals for achieving it. The first stage, which was set to begin on July 1, 1990, closer co-ordination of national monetary policies would begin, and all controls on transborder capital movement within Community would be terminated. In stage two, which began on 1 January 1994, the margin of fluctuation of national currencies within the ERM would be tightened, and a European system of central bank would be established. During this stage, the Commission and the European Monetary Institute will examine Member States' economic performance to see if there is a high degree of economic convergence, measured by:
- price stability (inflation rate must be within 1.5 percentage points of the three best performing Member States)
- avoidance of excessive budget deficits;
- observance of ERM fluctuation margins without devaluation;
- durability of convergence (assessed by long-term interest rates);
If a majority of states fulfil the set criteria, the heads of government are to decide whether it is appropriate to set a date for the beginning of the third stage. If no date has been set by the end of 1997, the third stage will begin on January 1999. In a third stage, a single currency would be created and managed by the European central bank, and the EC, would assume greater powers to direct the economic and financial policies of member states.8 As of January 1, 1999, the values of all European Union currencies have been fixed, relative to one another, and electronic exchanges will be done in Euros rather than individual national currencies. The new Euro coins and paper notes will be legal starting January 1, 2002. National currencies will no longer be accepted after July, 2002.The Euro becomes the new currency in Germany, France, Italy, Spain, the Netherlands, Austria, Portugal, Finland, Ireland, and Luxembourg. Great Britain, Denmark, ande Sweden have all chosen not to adopt the pan-European currency for now; however, Denmark's economy minister announced last month her nation might vote again on the issue within the next two years. Greece is the only member of the 15-nation European Union that has not been allowed to switch to the Euro because it could not meet the EU's tough standards. Norway and Switzerland, which are not members of the EU, will also retain their individual currencies.
The idea of Nation state in Europe in 20th Century
The successful creation of the U.S.A. and the process of institutionalisation of EU provoked a discussion about the place of Nation state in 20th Century. This discussion invokes question whether or not the nation state9 has outlived its usefulness.
In the 'useful' camp is Dr Alan Sked, a historian from London University and a fierce opponent of European integration, who believes that centuries of European dominance can be explained by the fact that Europe never was an empire -"Well these other places became united into empires and superpowers. You've got the Ming Dynasty, the Mogul dynasty, the Ottoman dynasty, and in these places you've got centralisation, harmonisation, bureaucratisation, corruption, red tape and then they became unable to adapt or to compete. Whereas Europe didn't become an empire, the church couldn't control the Emperor, the Emperor couldn't control the pope, the Catholic church split, the empire split up, and nation states emerged. And so in Europe you've got religious and political competition."
In the opposite camp is the political scientist from Prague, Alex Tomský. The nation state as originally conceived, he says, has no place at the end of the 20th century, let alone in the 3rd millennium - "The nation state is a very obsolete idea of course. It's an idea of the 19th century, as we all know. I see the nation state as stemming from nationalism, from the idea of a homogeneous society with a leader, with an authority, with a particular slant to history and ideology. Ideally speaking it is something that I don't want and I don't think it is a positive force. After all it's caused two world wars in Europe."
An agreed definition of the nation state, however, remains elusive. The state is the government and its institutions; the nation is best described as some kind of grouping of people who identify with each other, be it for cultural, ethnic, linguistic or historical reasons. The nation state is the marriage of the two ideas.
According to this definition, and opinions above, and according to the topic of this essay, it is very questionable whether the nation state is negative force in the process of integration, or whether is going to be the building block of the European integration. Because of this argument, this essay will rather deal with the issue of state's sovereignty and national autonomy, then with the concept of nation state.
The difference between national sovereignty and national autonomy
The national sovereignty (problem of definition)
In terms of international law, sovereignty is defined as the unchallengable power over a piece of territory and all the persons from time to time therein.11 From this point of view the single currency in the Community doesn't represent any loss of sovereignty because there is no challenge to the power over a piece of territory and all the population. Apart form this definition above there is the possibility of regarding sovereignty in the sense of national power of autonomous action.12 Money has also been frequently seen as an instrument for the achievement of wider political objectives, so we should also take into account the fact that the EMU directly affects the ability of participating states to pursue the national monetary policy.
In the modern doctrine of sovereignty, the sovereignty is divided into sovereignty de facto and sovereignty de jure. 13
The Delors Report sparked a lively debate. The most explosive political point, inherent in any discussion of EMU, centred on the question of national sovereignty. Most ERM participants had already de facto lost control over their national monetary policies. By the late 1980s their currency were pegged to the mark, the system's unofficial anchor. The Bundesbank formulated monetary policies in the EMS, and member states reaped the political and economic rewards of low inflation and stable exchange rates. In effect, Germany's partners in the EMS gave up using interest rates and nominal exchange rates as instrument of national policy. As far as monetary union was concerned, most members states to gain sovereignty rather than lose it. As participants in a federal monetary system, they would wrest some power back from the Bundesbank in Frankfurt.
On the other hand, as a clearest example of partial transferral of state's sovereignty is considered the structure of the European Community.
Imported debates about transfer of national sovereignty in EU countries
The debate about national sovereignty was loudest in Britain, where the economic benefits of EMU were also least apparent. In speech to the House of Commons in January 1991, the Chancellor of the Exchequer explained that safeguarding the "sovereign right of Parliament" would be one of his four priorities in the forthcoming intergovernmental conference on EMU.15 Even before the IGC began Margaret Thatcher, complained in July 1991that the ERM, into which she reluctantly brought Britain the previous October was "tearing the heart of parliamentary sovereignty". As for EMU, handing over responsibility for monetary policy, to the putative European Central Bank would reduce "national finance ministers to the status of innocent bystanders at he seen of the accident."
After the Maastricht ratification crises would show, attachment to the national symbolism of money ran deep in deep throughout the Community, especially in Germany, where the mark epitomised post-war prosperity and stability.
Not only had most countries already sacrifice national sovereignty by participating in EMU, but for some -notably Italy- Italy saw the future Community curbs on national fiscal policy as the only way to cut their exorbitant budget deficit.
In these debates, there are on the one hand "maximalists", such as the Italians and the Belgians, who are enthusiastic about economic, monetary and political union, and who don't automatically recoil at the prospect of federal Europe. On the other hand there are the "minimalists", with the United Kingdom and Denmark in the vanguard, who talk more of co-operation then they do of integration and who still make much of the importance of preserving national independence and sovereignty.
National autonomy (The loss of national macro-economic and monetary autonomy)
The illusion of national autonomy is still widespread and is widely confused with national sovereignty. The latter concerns the formal ability of a nation to act on its own rather than under the instruction of another action. That remains undiminished. National autonomy in contrast, is the ability of a nation to attain its objectives through unilateral action. This is heavily constrained in an environment of high interdependence. Economic co-operation may restore some effectiveness in pursuit of objectives. Far from undermining national sovereignty, such co-operation often represents wise exercise of that sovereignty.
In Cooper's view co-ordination can thus compensate to some extent for diminishing autonomy and -given the high degree of interdependence- it represents a wise exercise rather then an undermining sovereignty.
Judging by many scientific analyses and political comments the opinion, that the isolated national policies are not very effective is comparatively widespread.
There is a large consensus (even in the Delors report) that Europe should sooner or later have a single currency. One can say with more certainty that Europe will have a common currency in 2002 than that it will pursue a common European policy. The pro and cons in discussion about single Currency in Europe are not very persuading. This essay try only to outline the relation of sovereignty (national autonomy) and single currency. The main conclusion of this essay may be summarised as follows:
- Firstly, it must be admitted, that the turbulent year 1970s, beset by economic problems, were hardly the most fertile period for developing common or supranational monetary and macro-economic policies. On the other hand it is evident that the main dificulties is that the member countries are particularly sensitive about tetaining sovereignty in this field.
- Secondly, the European governments are adjusting to the fact that they are no longer fully in control of their monetary policy. One of the big problems facing. Europe is that its various member countries are preparing, either with enthusiasm or with resignation, to share what they no longer control: their currency.
- Thirdly, there is the fact that the states, which are participating in the EMU, are loosing, at least de jure, the possibility to use their national monetary policy for a wider political objectives. But judging from outlined history of monetary integration it possible to say, that most of these states de facto lost this possibility by the 80s, when the currencies of same European countries (including non Community members) were tied to the German Mark (DM), and so were their monetary policies.
- Fifthly, national states should be prepared to give up their traditional national instruments in given areas - in particular, monetary policy and to a less but not insignificant extent fiscal policy - to surrender a - mainly specious - macroeconomic and monetary autonomy in exchange for policies shared with other European states.
- The another problem is that due to the philosophy of political independence of the ECB at least countries which are used to a close political relationship of monetary policy and policy in general might be afraid of this concept. A good example for this point of view might be the statement of Mrs. Thatcher mentioned above. Moreover they might feel that, as the governing body of the ECB is not a result of a general election, the ECB might, inter alia, have problems making unpopular decisions.
- And the last problem with regard to a single currency may be seen in psychological aspects, which people have towards their own currency. A good example for this is the German Mark, which represents the economic miracle in Germany
As mentioned above, the perfect answer to the question whether the existence of single European Currency within nation state constitutes a substantial loss of state's sovereignty remains elusive. In a global, interdependent world, it is very problematic to say exact meaning of national sovereignty. Certainly another -concerning- issue is, that there surely is some loss of national macro-economic and monetary autonomy, and ability to act through self constrain in the Community, but on the other way there is some restore of effectiveness in pursuit of objectives as a result of higher economic co-operation.
Money are directly linked to European unity and the strengthening of the EC Construction, and Europe will probably never become a new "power" in classical terms when the very notion of power won't be transformed? From this point of view, it is possible to say that European states will be probaly forced to redefine the meanings of sovereignty and national autonomy.