The full text is attached of the lecture on 'Democratic Values and
the Single Currency' given by the Rt Hon Michael Portillo to the
Institute of Economic Affairs at Church House, Westminster on 14
The main thrust of Mr Portillo's remarks is that although the
European Union is entirely made up of member states that are
the Union itself is not democratic - and the more we transfer decision
making to European level the less shall we enjoy democratic
In a thoughtful speech he discusses how the ideal of creating a
united Europe has developed in practice and refers to the two distinct
approaches embodied by Spinelli, a federalist, and Monnet, a
functionalist who believed that functions one by one, and therefore
sovereignty, should be transferred from the national to the European
Among the points Mr Portillo makes are:
* 'The Maastricht Treaty appears to owe much to a functionalist
approach with its proposals that Europe should acquire its own defence
and foreign policies and its own currency. But federalists will be
happy with that, since the result is the creation of a new political
entity. It has the critical characteristic of a federation, in that
federation's laws are binding on the member states.'
* 'European integration is not the means to achieve the security of
our continent. It is the wrong route. Integration is being designed
a way that sharply reduces democratic control.
* If we shoe horn the nations of Europe into an artificial union, we
will not abolish nationalism, indeed we risk stirring it up. The
is that we make people feel that their national interests will be
overlooked, and that they cannot assert them through the ballot.
* That risks exactly what the architects of the new Europe say that
they wish to avoid: destabilising Europe, creating tensions and
releasing resentments that damage the present good relations between
* 'The creation of the European state has been approached in reverse
order to the creation of almost any other. Normally, a new state
establishes its institutions of government first, and goes on to create
its policies and its currency. In this case, the common European
policies and the currency are being created first, with the intention
that that should lead to demands, in the names of logic and democracy,
for the formation of the institutions of centralised European
* 'Democracy requires not only the cracy but also the demos, not only
the state but also the people. All the attributes of the nation
all its functions, can be transferred to the European level along the
Monnet-functionalist model. But what we do not have and what we cannot
conjure up is a demos, that is a single European people.'
* 'The peoples of Europe are too different from one another, their
histories, cultures and values are too diverse, for them to be brought
together into one state. We can work together and co-operate for
benefit, but Europeans do not have a common identity, or view of their
role in world affairs. They do not constitute a nation, and since they
do not we should not try to create a European nation state.'
* 'Global competition is indeed between industrial giants, but they
are companies not nation states'
* 'Some of those who think that the right response to global
competition is to create a bigger state, also believe in a bigger state
in the other sense, meaning a bigger role for the state, through more
interference and regulation. That frame of mind had produced the
chapter, and is a strong influence within New Labour.
* 'Excessive interference by governments, whether at national or
European level, is clumsy and unresponsive, and has already played a
large part in creating unemployment levels in Europe well above those
* 'Britain has gained control of inflation by its own efforts.
Britain has lower unemployment than most of its European neighbours,
that is just one of many indicators that it is competing successfully.
The current concern is not with devaluation, but with the strength of
* 'It has been argued that the single currency is the logical
completion of the single market. It is not. The greatest trading
partners in the world, Canada and the USA do not have a common currency
and have no plans to establish one. At present, none of the countries
with which Britain trades has the same currency as we do, and yet our
trade with them goes on rising.
British industry has to ask itself whether it really wishes to enter
the next recession with the currency locked at its present level, and
with the British government powerless to vary interest rates.'
* 'Those who are most influencing the progress of Europe believe that
European integration is the only guarantee of future security. They
wrong. It is democracy that provides our greatest hope of future peace
and prosperity. We should use our Atlantic and European institutions
every way we can to spread democracy and nurture it where it takes
* 'The European union is entirely made up of member states that are
democracies. But the European Union itself is not democratic. Neither
the Commission, nor the Council of Ministers nor the European central
bank is democratically accountable, and neither can they be made so
because Europe is not a nation. It follows that the more we transfer
decision-making away from the democratic member states to the
undemocratic European Union, the less shall we enjoy democratic
Mr Portillo reinforces and complements the warnings of the serious
implications if UK joined EMU given by William Hague at the CBI Annual
Conference [BMDF Note - 14 Nov 1997] and by Professor Martin Feldstein
in his recent article 'EMU and International Conflict' in "Foreign
Affairs" [BMDF Note- 24 Nov 1997].
I am honoured to be able to deliver a lecture to the IEA and I thank
John Blundell for the invitation to do so. The triumvirate of Antony
Fisher, Arthur Seldon and Ralph Ham's has provided a remarkable
demonstration of the power and influence of ideas. They patiently
expounded a remarkable combination of common sense and academic
excellence; never afraid to yell out from the crowd, when, as was
usually the case, the ruling emperor of conventional wisdom was
wearing no clothes. Their thinking deeply affected the last
Conservative government, many other governments around the world, and
new Labour. I cannot think of a better forum in which to deliver what
My object tonight is to discuss the single currency, but not as it is
often talked of in Britain, as though it were merely an economic
which can be measured in terms of costs and benefits. I wish to
it in the terms used by our partners. who see it as a project in
re-shaping the way our continent is governed, to create a political
union that can free Europe from the fear of conflict between the
The cost and causes of war
In the last two centuries the peoples of Europe have paid a terrible
price in wars. In World War I, fifteen million were killed, mainly
soldiers. In World War II, the toll was at least 41 million, of whom
most were civilians. Those terrible events have naturally and rightly
led highly distinguished statesmen to dedicate their lives to creating
conditions in which war would not occur again. There is no higher or
more important objective for politicians in Europe than to work for
policies that may better guarantee the security of our continent and
avoid a repetition of the dreadful slaughter of our modern history.
We can distinguish two causes at the root of past conflicts in
Europe. The first is Franco-German rivalry Prussia and Austria invaded
France in 1793 and 1813. France occupied Prussian and Austrian
territory between 1805 and 1813. Prussia dealt the French army a swift
defeat in 1870, and went on to besiege the French capital causing many
Parisians to die of starvation. Germany invaded France in the opening
stages of both world wars.
Understandably therefore, much effort since the last war has been
devoted to creating political institutions, and other links, to bind
former adversaries together.
A second cause of past conflict was the so-called Eastern Question in
its various forms. There was the clash between the empires of
Christendom and Islam, both ideological and territorial. The
assassination in Sarajevo of an Austrian archduke, and Austria's
for it on Serbia, provided the spark for the outbreak of the Great War.
But Germany's suspicion and fear of Russia, another part of the
Question, were a more fundamental cause of that war. The mutual
aggression between totalitarian regimes in Germany and Russia supplied
the bitterest and most costly conflict of the Second World War.
Comparatively little effort has been devoted to bringing Russia fully
into the family of western nations, or to building bridges between
Christendom and Islam in Europe, and I shall return to that later.
First, let us look at how efforts to resolve the conflict between France
and Germany have been taken forward.
The idea of a United Europe
The ideal of creating a united Europe, even a United States, grew up
as part of the humanist-pacifist tradition even before the wars of the
twentieth century, but until the end of the second war was largely
confined to academics and dreamers. Thereafter, it was taken up by
statesmen like Altiero Spinelli and Jean Monnet.
The two men embodied two distinct approaches to European unity, and
the distinction is important even today. Spinelli was a federalist,
believing that local, regional, national and European authorities
complement each other. Monnet did not describe himself as a federalist
but as a functionalist, believing that functions one by one, and
therefore sovereignty, should be transferred from the national to the
In the official European Community,' literature of the 1990s it is
argued that 'Today the two approaches have been merged'. Perhaps so.
The Maastricht Treaty appears to owe much to a functionalist approach
with its proposals that Europe should acquire its own defence and
foreign policies and its own currency. But federalists will be happy
with that, since the result is none the less federation, that is the
creation of a new political entity. It has the critical characteristic
of a federation, in that the federation's laws are binding on the
Those who support the creation of a federation sometimes argue that
federalism is generally misunderstood in Britain, and tell us that in
continental Europe it is about decentralisation, and that federal
constitutions in a number of European states emphasise the devolution
powers to states or regions. But the federalism that is being unfolded
at European level is not like that. It does not emphasise the
devolution of powers to member states. The process of integration now
being pursued from one inter- governmental conference to the next, is
highly centralising and owes much to the Monnet- functionalist
British policy on European security
While Spinelli, Monnet and others were advancing European unity by
whatever means they could, which in their day meant mostly devising
institutions governing economic and trading relations in Europe,
held aloof from that process, but committed itself directly to European
There is a myth that Britain has never cared about Europe. That is
an extraordinary claim. The British Empire lost nearly a million
combatants in the First World War, despite beginning the war with what
the Kaiser called a 'contemptibly small army'. In the Second World
hundreds of thousands of British people died at home, or fighting in
around Europe for the freedom of Europe.
Following that war, at a time when the nature of the Soviet Empire
was becoming clear, the British foreign secretary, Ernest Bevin
committed Britain to a Western Union, an alliance of European and
non-European states dedicated to providing their peoples with security.
In 1954, attempts to create a European Defence Community were
by France at the Pan's Conference. But the British foreign secretary,
Anthony Eden, made an historic commitment on behalf of this country to
maintain land and air forces in Europe for the following forty years,
thus providing a clear and unmistakable guarantee of Britain's
willingness to fulfil its obligations if the security of our allies
ever violated. It was a remarkable undertaking for an island nation to
make, especially given our traditional strategy of maintaining a small
army and avoiding continental military commitments.
Different models for Europe We need to understand the history in
order to understand how strong IS the impetus to European integration.
The momentum derives from an understandable fear of war. That is what
lies behind Chancellor Kohl's famous remark that European integration
'a question of war and peace'. We all subscribe wholeheartedly to the
objective of achieving peace and security 'vlore importantly, British
foreign policy over five decades has been committed to that objective,
and Britain's actions have followed its words.
Everyone can appreciate the terrible suffering experienced by Europe
and share in the objective of never allowing it to happen again.
Furthermore, Europe is right to sweep away barriers to trade,
and mobility across the boundaries of the nation states of our
continent. But there are many different means by which those
can be achieved. The functionalist, that is to say, centralising model
now being applied by the Commission, and by most of our partner
countries, is not the only paradigm that could be used. Nor is it the
case that those who oppose the present course are anti-European, still
less chauvinist or xenophobic.
General de Gaulle was famously in favour of a 'Europe des patries',
and opposed the tendency of the European Commission to acquire new
powers for itself. He employed rough tactics to establish the
that nation states should not be over-ruled by majorities on matters of
vital national interest.
How could it be that someone who valued Europe, who had fought for
its freedom and knew as much as any about war, still nurtured a belief
in the nation state?
The answer to that requires us to consider a little more deeply what
are the causes of conflict. It seems that those who want to create a
United States of Europe believe that nationalism has been the principal
cause. They think that if you can replace the nation states, and make
the nations of Europe dependent on each other in a new European state,
you will have dealt with the problem of nationalism and therefore
abolished the main cause of war.
But it is not enough to assert that European wars have been caused by
rampant nationalism. Two other things have been necessary too:
despotism and a sense of grievance. Take any of the wars of the last
centuries, and it will be seen that the aggressors were despots: French
revolutionaries, kaisers, emperors, Hitler and Stalin. They
ruthlessly on some supposed injustice done to their nation, some piece
of territory that had to be restored to the mother- or fatherland, some
minority that yearned to be set free from its foreign repressor.
The remainder of this speech can be found on Part 2 and Part 3