Текст 16 The European Community

The European Community was established by the original six members in 1957. Its chief features were two: there would be a free trade area inside the Community, and there would be Community-wide programs financed by fiscal contributions from member-governments. The largest Community program was the Common Agricultural Policy (CAP), a system of administered high prices for agricultural commodities, which has led to the famous wine «lakes», and butter «mountains». A more modest program was the Structural Funds, designed to provide subsidies for social infrastructure, especially in poorer areas of the Community.

Over the following 30 years, the Community was enlarged. The original six - West Germany, France, Holland, Belgium, Luxembourg, and Italy — were joined by Denmark, Ireland, the UK, Greece, Spain, and Portugal. By 1990, therefore, there were 12 members.

Community enlargement was riot accompanied by any change in the fundamental structure of the Community. Member-states continued to set national policies. The dreamers and the Eurocrats were always pressing for closer integration, for example by harmonizing industrial standards or national tax rates, but this was usually thwarted for two reasons. First, since each country had a different way of doing things, it was impossibly cumbersome to negotiate the single set of regulations, which would apply to all member-states. Second, of course, it was political dynamite. Nobody wanted to adopt somebody else's procedures and policy.

Текст 17 European Monetary Union

In this section we consider European Monetary Union (EMU). Proponents of EMU come from one of two standpoints: either, like Lord Cockfield, they see it as the next step along a track whose terminus is nothing short of European union itself; or, more pragmatically, they see it as the logical outcome of the EMS controls on capital movements have been abolished under the 1992 program,

A monetary union has permanently fixed exchange rates within the union, free capital movements, and a single monetary authority responsible for setting the union's money supply.

Technically, a monetary union need not have a single currency. English and Scottish currency circulates side by side in Edinburgh. What matters is that the exchange rate between them is known with certainty and that a single authority (the Bank of England) is responsible for determining their total quantity. Thus, EMU could involve the separate circulation of Deutschmarks, French francs, Italian lire, and pounds sterling, at fixed exchange rates and with a European central bank; but if we have got to this stage, it is likely to be convenient to have a single currency as well.

In previous chapter we argued that in the past the EMS had been sustained partly by exchange controls on capital flows. By insulating national currencies, these allowed different members to pursue different interest rate policies while broadly fixing exchange rates in the short run. Countries could become EMS members without completely sacrificing their autonomy over domestic monetary policy.

1992 committed most EC members to abolish capital controls by June 1990. Only the most recent EC entrants (Spain, Greece, and Portugal) will be given a little breathing space, but their controls too will be gone by 1992. We shall close to perfect capital mobility within the EC.