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4

Making the Market: The Single European Act, 1980–88

Like cooling steel, recent history sets easily into patterns which then resist remoulding. The combination of media reports, expert and specialized commentaries, interviews, articles and memoirs, leads to a received wisdom which successive generations of political scientists, contemporary historians and biographers advance piecemeal. Some seek for a synthesis from which to theorize, others highlight what they take to be particularly significant episodes or individuals. At present, the consensus suggests that the Community experienced a great regeneration around 1985 with the Single Market White Paper serving as its dynamo; then, in a mood of euphoria, member states and the Commission took a leap at Maastricht, which they knew to be contingent on the internal market, only to find themselves isolated from their national publics and from each other. Recession and political disarray followed hand in hand.

Chapter 3 suggested that a variety of players at different levels of activity were engaged, as early as 1980–81, in a struggle to break out of the inertia which had blanketed EC activity since the first oil shock. But what were the aims of each of these, and who contributed most, in that exuberant period after Fontainebleau?

The fact that EC archives are not yet available is not an insuperable difficulty, but it makes it harder to separate underlying trends from less significant details. It is not clear, for example, whether the oligopolistic tendencies among firms in this stagnant decade were caused by the failure of small and medium companies to adapt quickly enough, or by large ones exercising their advantage through concentration and monopoly power, often in collusion with their national governments. Yet the internal market was advocated by players who took the latter assumption for granted, together with its logical extension to the concept of a single currency. Nor is it obvious that the Single European Act was the only way to remedy the collusive, anti-competitive state of mind which appeared to envelop European business and industry in the face of the American and Japanese challenges.

The account given here takes a historical perspective on a very complex and still-continuing process; and is intended to show not only the relative importance of the players (the Commission, member states, the European Parliament, industrial or financial bodies) but their motivation at the time. Seen in this way, the significant points in the narrative are those where the greatest measure of agreement was reached between them, prior to more public action.

In the second half of 1984, following the breakthrough at Fontainebleau, the British budgetary question had apparently been resolved, the EC’s financial system had been unblocked, aspects of the CAP, such as the wine market, had been reformed, and the Regional Development Fund expanded. The Esprit Programme introduced a more coherent policy on technology, while the single customs document launched a substantial assault on frontier barriers. Jacques Delors, an ardent integrationist with a considerable reputation as former French finance minister, had been chosen as the new President of the Commission. He could in turn be expected to demand a higher standard of Commissioners and overall competence than had been the case in the previous ten years.

The recession had also ended, providing a two-fold spur to activity: firstly because of the upturn in global demand and secondly because so little had been done since the mid–70s crisis to improve European industry’s competitive performance vis-à-vis the United States and Japan. General economic convergence led member states towards a common awareness of the likelihood of takeovers looming from outside the EC, and the continuing loss of EC companies’ share of world and European markets. Meanwhile, as international trade recovered, the EC’s defensive strategies and member states’ endemic lapses into protectionism came under fiercer scrutiny, particularly from the USA, where American trade negotiators in the Reagan administration began to use much rougher language towards both the EC and Japan than they had under President Carter; but also from Britain, where inflation control, privatization of state industries, and widespread assaults on the labour market were becoming the keynotes of a novel sort of industrial regime – one which Mitterrand’s 1983 turnabout suggested other EC states might conceivably follow. On a more general level, the development of competition law and its enforcement, mainly in Germany (for France and Italy barely had a competition policy other than the one the Commission tried to police),¹ led to a climate in which linkages became possible between what the German government was trying to achieve and the Commission’s long-term industrial policy. American and Swiss companies in the EC soon became aware of this new climate, generally earlier than their EC national counterparts.

At the same time, the ERM moved into its ‘classic’ phase, being transformed after March 1983 into a de facto DM zone with a core of currencies (those of Denmark, the Netherlands, Belgium and Luxembourg) linked to the DM, matched by an increasingly hard French franc. Realignments were still possible, but within progressively narrower limits, less frequently, and on principles established by the anchor country – in effect by the Bundesbank. This system served better those states which embarked on new, more market-oriented economic policies than those who tried (as France had done briefly in 1981–3) to proceed on their own. (Germany had, after all, abolished exchange controls two decades earlier.) For roughly four years, the ERM acted as an external, neutral arbiter, which suited not only governments but industrial and financial interests, because it disciplined inflation and wages and also helped to wean governments away from what these players saw as endemic overspending in pursuit of electoral support.²

Because the British government believed it had already solved its problems, however, Margaret Thatcher saw no need to relinquish sterling’s greater margin of manoeuvre, and the more that ERM currencies converged, the less desirable entry seemed.³ Britain already had a free capital market, having abolished exchange controls in 1979, and the wild fluctuations of sterling in this period of increasingly deregulated financial markets suggested that the EMS would have little bearing on the four freedoms envisaged in the future single market; rather the reverse, for British Conservatives and many City economists expected that financial markets would force realignments, whatever governments did to prevent them. The ERM also seemed to inhibit policy flexibility towards interest rates (now the main, indeed the only monetary weapon used in London) and the supply side measures which the government believed were required to reduce labour restrictive practices and rigidities in wages. It seemed therefore that an historic cleavage inside the EC was being perpetuated, though not necessarily, as it was conceived in Britain, to the internal market’s disadvantage.

But member states aligned themselves on different axes in response to the other major feature (apart from global recovery) which encouraged ideas of regenerating the EC. Mikhail Gorbachev came to power in March 1985, after the brief Chernenko interregnum, evidently bearing a mandate from Yuri Andropov and the Soviet state institutions to reform the system from above. For France, Britain and Germany, this offered chances of playing novel roles, especially insofar as there would be trading prizes in the Comecon states. Yet at the same time the new gravitational pull eastwards imposed stresses on the Franco-German understanding. From France’s point of view, political leadership in the EC needed to be re-established to offset West Germany’s likely economic predominance in eastern Europe. Smaller member states, which had only reluctantly acceded to the French Presidency’s conduct at Fontainebleau, could be expected to take advantage of this shift in balance, and to assert themselves more in future.

In asking what each member state wanted of the internal market, and through what general framework they approached the problem of EC regeneration, it is simplest to take the largest first, according to their relative political weighting in the European Council which, growing up outside the treaties, had by now partly superseded the intergovernmental functions of the Council of Ministers.

FRANCE

Until 1981, France’s general interest had been to maintain the link with whatever government existed in West Germany, and the coherence of its worldwide policy (for example, in Africa with the Lomé II Agreement 1979), while preventing EC institutions – the directly elected Parliament and the ECJ, but above all the Commission – from acquiring power to deflect or subordinate French interests. Two years of Mitterrand’s socialist and counter-cyclical, counter-GATT programme, the first such essay since Leon Blum’s Popular Front in 1936, put in question not only the Socialist government’s economic standpoint but the nature of France’s polity and its existing relationships within the EC. After the grand tournant in 1983, however, the whole French state machine was realigned in a strongly deterministic European project, and Mitterrand assumed at Fontainebleau, as Giscard had done earlier, the role of ‘chef d’état de l’Europe’.⁴

The new ‘grand project’ of integration and European Union was not immediately accepted by the Socialist party, despite the Communist ministers’ withdrawal: Jean-Pierre Chevenement and the Ceres radicals represented a powerful strand whose influence was not easily downgraded – although in the end, once the Socialist programme proved to be unrealizable, they adopted the European project with almost equal fervour. But the transformation was implemented directly from the Elysée through an increasingly well-coordinated state administration; and it received substantial backing from French industrialists, appalled at the economic consequences of the previous two years.

Its corollary, as in the 1960s, lay in modernizing French industry, banking and the economy, through the internal market and a stable exchange rate within the ERM. Mitterrand had two years in hand before the next parliamentary elections, four years before the presidential one, and he could rely on West German understanding that any attempt to break out of the ‘lourdeur des affaires communautaires’ could be successful only if France and Germany were conjoined.

In French eyes the project had four facets. Firstly, having accepted the ERM and the need for convergence, France should, if the ERM was to function properly, look beyond mere stabilization accompanied by periodic, often traumatic realignments, to a tight alignment of parities as the way to eventual Monetary Union and a single currency.⁵ Secondly, the social element should be enhanced but given an appropriate market-led ethos, more acceptable to West Germany and Britain than the original ‘workers’ Europe’.

Thirdly, the Parliament’s reopened debate on European Union should be assimilated – but by member states at Council level – in order to restore the EC’s institutional coherence. This ran counter to long-standing opposition to any increases in the Parliament’s competence by the Conseil d’Etat, Paris bureaucrats, and the Trésor. It even involved some support for the Spinelli initiative. Yet the problem of the indivisibility of French sovereignty, which had for years made prior acceptance of EC laws problematic, may well have been obviated by Delors’s 1985 coup de génie in putting forward simultaneously the means to satisfy both economic and political projects. Political union, which was West Germany’s major ambition, would thus become a complement to economic integration⁶ – in contra-distinction to the British dislike of both.

French defence policy provided a contingent element, since West Germany appeared willing at the same time to be associated with a revival of the 1963 Elysée Treaty and a renewed WEU. Geoffrey Howe’s alternative paper, put forward at Stresa, served as a further stimulus for launching the Franco-German proposed treaty on European Union in 1985, the fruit of what Simon Bulmer calls their ‘complex interdependence’, before the British initiative could acquire allies.⁷ Finally, having relinquished his earlier dreams of a Europe wider than the EC, Mitterrand now seemed content to see the EC as the core, to which EFTA, Mediterranean and even Comecon states could adjust. France’s role was to serve as mediator and adjudicator, a motor for scientific and technological advance, and a liberalizing influence. There was even talk of extending QMV and Commission (but not Parliamentary) competences.

Yet Mitterrand gave no direct indication which of these four should predominate.⁸ A substantial part of the entire project design depended on how far he could recreate a centre-left governing party at home and undermine the right, utilizing the deep divisions between Giscard’s UDC and the Gaullists. Ambiguity served also to disguise the extent to which the project required West Germany and the EC itself to be shaped according to French terms.

WEST GERMANY

From its inception, the EC had formed an essential framework for West Germany’s process of political and economic rehabilitation, until in due course it became the precondition for whatever followed. Since Adenauer’s time, federal governments, usually in coalition, had used it as part of their increasingly elaborate balancing act between Ost- and Westpolitik, between the USA and Russia, West and East Germany and between West Germany and France. On the basis that this would prevent German isolation in the future, they had developed the EC’s most technologically resilient and efficient industrial economy. That secure basis helped determine the German vision of an ideal EC: a community to ensure peace and security in Europe, an economic entity based on free trade, and a community of values and common action (Werte-und Handlungsgemeinschaft).

Each of these principles reinforced the more general balance of West Germany’s other external relations: whatever German unity emerged in the future was to be understood in its European dimension, not as a purely national phenomenon. Public opinion seemed benign; no anti-EC party existed, nor was there any serious questioning in public of these aims – rather, there was a consensus in West Germany that their country represented the very model of an EC state. The price, that West Germany would always be the largest contributor to EC funds, was – not always unanimously – accepted but it was extended with each new state’s accession, in 1973, 1981, and later with Spain in 1986; each time, the justification to domestic objectors being put in terms of German manufacturers’ access to these lucrative new markets.

But the Federal Republic as a whole was not notably integrationist, and suspicions existed in Bonn, and even more in some Länder such as the CSU-dominated Bavaria, about the use that Free Democrats and their leader, Genscher, made of their long hold on the Foreign Ministry. The Christian Democratic majority of ministers in Bonn did not directly take up the Genscher-Colombo initiative (see above, p. 102), as if remembering Schmidt’s phrase (in a speech in 1977) that ‘Germany did not want to be in the front row’.⁹ German governments went only so far as this complex web of interests dictated. Indeed, the Federal administration often acted as a brake so that, following the 1970s experience, if France were to induce Germany to follow, the deals had to be made via the Chancellery.

Germany’s tenure of the Presidency in the first half of 1983 indicated that the reactive, formal and legalistic approach to eventual European Union, based on experience of Federal government, decentralization, and citizenship rights, would continue under Helmut Kohl’s Christian Democrats. No one, least of all the Bundesbank, had forgotten Germany’s ill-fated reflation initiative, taken under American pressure in 1978–9, with its inflationary consequences. Thus the West German interpretation of Stuttgart’s ‘solemn declaration’ did not represent full endorsement of what the French government currently desired.

Any estimate of West Germany’s overall aims depends on which source is chosen: Chancellery, government, Bundesbank, Länder governments, or the conjunction of chancellor with the core of foreign, economic and agricultural ministries. As far as industrial policy was concerned, the view of the Economics Ministry (BMWi) and Bundeskartellamt (BKartA) favoured free trade, open competition, and completion of the internal market, starting preferably with deregulation in transport, energy and telecoms, in preference to a single overall initiative. Informally however, the outcome depended on an intricate process of cohabitation and bargaining between the Bonn bureaucracy, leading industrial firms, and the banking system, which was to be brokered at all levels in the Federal Republic. (So content were German companies with this system of ‘patronage government’ that few bothered to open offices in Brussels until the late 1980s.)

The Bundesbank wished monetary policy to come within the Treaties but strongly opposed EMU (as Otmar Emminger’s letter of protest had shown in 1979) even at the level of a future Treaty preamble, it being a matter for member states to safeguard their monetary sovereignty, whilst at the same time taking account of the EC’s common interest. Issues relating to foreign policy or defence which required positive responses were treated cautiously; like Schmidt before him, Kohl showed himself willing to accept a steer, either from the European Council, or from France acting in lieu.

The principal weakness of this complicated, decentralized policy-making was that it inhibited German initiatives and thus disguised Germany’s latent strength (which was, paradoxically, German politicians’ intention). It also put the onus informally on the Chancellor either to concert policy in advance with France, or simply to acquiesce in what French governments did (the case of Schmidt’s decisiveness over EMS is unusual). Finally, it tended to irritate British ministers, making any closer relationship with them unlikely, even if that had not already been excluded in the 1980s by personal antipathy between their two leaders.

BRITAIN

The case is apparently simple, especially as expounded in Margaret Thatcher’s memoir, The Downing Street Years. In fact it was ambiguous, full of nuances, and hidden passages reflected in contrasting accounts.¹⁰ In an assessment of the economic significance of membership, made in 1979, the Treasury had noted that Britain had become a European country visited by 7 million EC tourists, with 42% of its export trade to, and 44% of its exports from, Europe and 2.5 million jobs directly dependent on the EC.¹¹ Free trade within the Community, after deducting the costs of the CAP (£250 million) and the common fisheries policy (£150 million) added a net total of £120 million to the British economy; furthermore, 59% of United States foreign direct investment went to Britain and the EC – a matter of the greatest significance also for Scotland and Northern Ireland.

By 1984, on the other hand, Britain’s post-War settlement, expressed over three decades of neo-Keynesian macroeconomic management and tripartite industrial and labour policies, had been largely replaced by a deflationary fiscal and monetary policy, and what may be called the obverse of an industrial one, concerned with privatizing the state sector and forcing flexibility into the labour market. Contested with little success by a demoralized Labour party and a trade union movement suffering rapid membership decline, the new values in politics, finance and industry contrasted sharply with EC social initiatives such as Vredeling, or the defensive industrial cartels associated with Davignon. Britain had long been hostile to the CAP and was to remain so. Whenever ‘own resources’ or institutional reforms surfaced, Thatcherite politicians tended to read the worst into Commission initiatives.¹²

Assuming that the imbalance in the British budget contribution and the CAP’S iniquities represented the EC’s true face, Margaret Thatcher tended always to present herself as the purveyor of financial discipline and sound book-keeping. She publicly construed Stuttgart’s ‘solemn declaration’ as meaningless and attacked the Spinelli Report for absurd idealism. But she was determined to increase Britain’s share of world trade and financial services after decades of decline, and therefore endorsed the internal market as a free trade landmark.¹³ So, for more complex reasons of inward investment and new technology, did the DTI: thus the core of civil servants in Whitehall were encouraged to assist the Commission in its 1983 harmonization plan (see p) and later in preparing the government paper Europe and the Future.

Nigel Lawson, chancellor of the exchequer 1983–8, realized that Britain’s ERM entry would add the exchange rate weapon to his very limited armoury, once the strict monetary policy based on £M3 had been abandoned in 1983.¹⁴ But the Bank of England’s support for entry, which had been strong up to July 1983 under the Governor, Gordon Richardson, evaporated under his successor, Robin Leigh Pemberton. Lawson’s failure on his own to convince the prime minister that sterling should join the ERM led, after the 1984–5 sterling crisis, to sterling’s ‘shadowing’ of the DM, an irregular and informal policy about which Thatcher later claimed not to have known.¹⁵

The Conservative party had failed to evolve a coherent EC strategy when in opposition in the late 1970s and its leadership remained obsessed with Britain’s contentious budget contribution until mid–1984. Nothing of note therefore appeared in the 1983 election manifesto. Geoffrey Howe’s growing interest, which led to what in Conservative party terms was a surprisingly open paper, Europe and the Future (July 1984, defended by Howe at the party’s autumn conference) dated only from Stuttgart. Meanwhile, beyond Whitehall and Westminister, layers of antipathy remained in both political parties. The popular press reflected the adversarial mood and helped to shape perceptions in a very different way from 1972–5, so that the level of public ignorance actually increased.

Industry, which had strong interests in the internal market, could make no impact on this political combination. The CBI monitored EC developments closely but had lost much of its earlier influence with the prime minister in the early 1980s; City markets showed little interest at that stage (though the Bank of England soon picked up its significance for financial services and insurance). Even in Parliament it was the House of Lords Select Committee that investigated rather more than committees in the Commons. Meanwhile, whatever civil servants and diplomats thought, ministers’ policies were effectively defended during the British Presidency in 1981, so that Labour’s poor handling of the office in 1977 was forgotten. But Britain’s partisan nationalism nevertheless antagonized other member states.

Up to 1985, the Conservative political animus lay not primarily against the Commission (indeed Thatcher supported Delors for the Presidency) so much as the EC’s integrationist ethos, so that the second Thatcher government saw no merit in moving beyond free trade and the internal market. Stronger supporters of the latter, such as Geoffrey Howe, Leon Brittan, and Michael Heseltine, thought in terms of detailed legislation and constitutional conventions, rather than the prevalent EC way of operational texts to be interpreted later. Yet there was evidence of change at the top of the Conservative party in 1983, and again at the Dublin Summit in December 1984, even on the subject of QMV. Probably as a result of the Athens debacle, Thatcher herself prepared to concede some extension, though preferably only after prior inter-governmental agreement.¹⁶

As French and West German politicians saw the future in terms of their own recent history, so did British leaders, who envisaged a market-led project in which they, like the Americans, could hold on to their early deregulatory lead. They opposed not only the idea of a two tier EC but what was later styled ‘variable geometry’; and they construed the single market itself as the only important aim, unconnected to EMU or political union. But they were realistic and prepared to concede trade-offs such as QMV to attain that primary aim.

ITALY

Since 1957, Italy’s relationship with the EC had reflected an underlying formalism, a largely juridical approach, so that by the 1980s several distinct government institutions existed, each with a separate function, joined neither by political coordination nor synoptic thinking, apart from what was provided by a governing majority led usually by successive factions in the Christian Democratic party (DC). Despite political society’s apparently widespread enthusiasm for the EC idea, there had been little continuous involvement over the years – hence the importance of a few individuals and interest groups, together with giant firms which, for lack of government support, maintained direct links in Brussels. Except in the industrial north, and on the left (mainly in the unusually open Communist party), political and civil society rarely engaged with each other. In default of a coherent, incorrupt and efficient policy-mongering bureaucracy (as existed more obviously in northern Europe), sustained policy depended on the vagaries of political brokerage which sustained the pentapartito, the long-running coalition.

Thus what appeared to be Italy’s prompt responsiveness to EC thinking compared badly with the Rome government’s actual implementation of legislation (highlighted by the high number of ECJ judgments against Italy). This indicated that Italian institutions had not been permeated by EC values, even when the Commission or Council tried specifically to do so, as they did in reclaiming the endlessly backward Mezzogiorno administration. Because the Italian parliament had in effect been excluded from the EU coordination process as a result of party bargains, a substantial democratic deficit existed. An uninterested public and an inward-looking bureaucracy confronted a tiny elite of insiders in the Foreign Ministry and the Italian Permanent Representation in Brussels. But the most effective of these were usually not party men. Those with a career in Rome in mind tended to stay apart from Commission colleagues who in turn found them deficient in European ideals.

Italy’s initiatives therefore tended to come from a few leading politicians in the Foreign Ministry such as Emilio Colombo. If the activists were outside government, like the Independent MEP Altiero Spinelli, their work had little resonance in political life. Even if the evolution of increasingly powerful regional administrations (often run by the PCI in a relatively incorrupt and efficient way after the 1976 elections) produced regional linkages to Brussels (see below, chapter 9), this led to significant conflicts over competence with the Italian Constitutional Court and, in the 1980s, a renewed bout of government centralization. Any hopes that EC membership might be a means to reform Rome itself could not yet be fulfilled.

Italian reformers however welcomed the Parliament’s attempt to relaunch political union. The undoubted effect of the EMS in curbing Italian inflation, together with the firm support of the Banca d’Italia and the heads of the largest industrial firms, ensured enthusiasm for the internal market project. Socialists as well as Christian Democrats concurred. Italian industrialists, members of the ERT, or Confindustria (which used the newspaper it owned, 24 Ore, selling 300,000 copies a day, as its advocate) took an active part. The only real opposition came from the banks and the insurance sector, both of which were deeply uneasy about the price of adjustment; and, in an ill-focused way, from Parliament whose MPs resented their exclusion from the process.

Foreign and Economic Ministries, Banca d’Italia (one of the few wholly untainted institutions), giant firms such as Fiat, Ferruzzi and Olivetti, and even small firms in the North eager to escape the state’s tainted bureaucracy, could agree that the internal market would bring opportunities, long overdue restructuring, and administrative reform. But there was no detailed plan, no prior decision as to whether to follow the Davignon or the ‘Anglo-Saxon’ interpretation, so that in no other member state were the practical details of the 1985 White Paper so far reaching in their effect on how the discussion would evolve. Meanwhile, on the way to the Single European Act, the byzantine games played out on the EC stage and under the Italian Presidency (including the crucial Milan Summit 1985), reflected both the sum of domestic political strategies and Italy’s bilateral bargaining with France and Germany. In short, Italy presented a genially positive face to the EC, excusing its shortcomings in implementing legislation or coordinating policy on the grounds of overload, while the political parties milked EC resources – not always for local advantage. This state of affairs was almost the exact antithesis of that in Britain.

THE NETHERLANDS

Since the 1950s, the EC had been a fundamental article of faith in Dutch political and public life. Seen originally as a means to contain Germany, it became, once post-War hostility had diminished, a larger replica of the Netherlands itself, a legally based form of collective rule. Given that Dutch involvement in Benelux’s economic integration pre-dated the Treaty of Rome, this worked well in the 1960s while the EC still behaved as a collective, and when two Dutch former prime ministers filled senior posts in Brussels. But it was threatened, firstly by de Gaulle’s intransigence, and secondly by the advent of the Franco-German entente, which Dutch leaders saw as inevitably prejudicial to the aspirations of small and medium-sized states.

The Netherlands was wholly opposed to the developing practice of settling issues between heads of government (inter-governmentalism) and its governments deliberately set themselves up to act as the guarantor of small states’ rights under the Treaties. In Dutch hands, the Presidency served as a means to help the collective machine run smoothly, with none of the directive tones supplied by Giscard or Schmidt. Many of late 1970s’ and early 1980s’ changes seemed, to the Dutch, undesirable: the Franco-German understanding, the advent of the European Council, the EMS, and the backlog of delay in dealing with Commission proposals. The Dutch therefore sought QMV on a wider scale. But unlike the Belgians, they stuck to a conception of the EC which had been implanted much earlier in the Beyen Plan (see p): they tended to accept whatever ideas the Commission proposed, believing that course of action to be a correct reading of the 1957 Treaty.

A few giant companies dominated industry and treated such initiatives as Wisse Dekker’s report (see p, above) as part of their corporate strategy. The VMO’s outlook paralleled the country’s ‘instinctive political attitude, never really discussed’; which envisaged the internal market in terms of controlled adjustment rather than full liberalization – though the VMO did lobby extensively for telecoms deregulation.

Further, progressive integration was taken for granted by Dutch public opinion, together with an increasing role for the European Parliament, while progress to EMU and political union ranked as high as abolishing trade barriers. Progress was to come according to agreed procedures and deadlines, beyond the capacity of larger governments to adjust. Given its open economy, the Netherlands strongly opposed protectionist tendencies and looked outwards to international as well as European trade. Successive governments supported NATO, were generally favourable to the USA, to liberal tax regimes, and FDI rules, and were adamantly against state intervention – thus coming closer to the British interpretation than that of Germany, despite having linked the guilder to the DM since 1973-

Long habituated to ideas about social harmony, decentralization of state power and tripartism, Dutch governments supported any Commission proposals to give organized labour greater advantage vis-à-vis capital and management, and still vested some hope in Ecosoc as the forum to discuss employment policy and the social dimension. In spite of a decentralized system of administration which required endless harmonization, the Dutch impetus was often effective on the European Council.

BELGIUM

As with the Netherlands, the EC was never a matter of dispute. Belgium received great economic benefits and a status which no small country could have achieved on its own. The price – if it was a price – had to be paid in terms of the impact of EC federalism in a country whose increasingly polarized ethnic divisions reflected its nineteenth-century social evolution and the creation of the state out of two distinct elements. Whether EC membership actually accentuated the process of transforming the unitary state of 1970 into a federal one in 1990, (‘a federal state composed of communities and regions’) is unclear, but all relations with the EC and its institutions became politicized, though not necessarily in a contentious way. Each Belgian Presidency had to replicate the domestic role of government in a sort of permanent arbitrage between decentralized units.

For the majority of Belgians, their polity pre-figured what the EC would eventually become: a cooperative framework of states and institutions with a strong regional dimension and a common citizenship. These assumptions underlay the Belgian Presidency’s conduct of EC crisis management in the case of Poland, Libya and the Falklands war in 1982. On the other hand, because of complex national competences and Flemish/Walloon rivalries, long delays in incorporating EC laws were inevitable – and much criticized by the ECJ.

All-party consensus prevailed on matters concerning the economy and integration, partly because 70% of Belgium’s trade lay within the EC and partly because the EC was taken for granted as the prime source of Belgian status in the world. Any moves towards reinvigorating it, including the internal market, were welcome. But on balance, Belgian governments followed the lines set by Davignon and recommended by Dekker, because of the relatively huge part still played by their declining steel, coal and textiles sectors.

LUXEMBOURG

Living in a tiny country with no pretensions to any of the usual connotations of power, Luxembourgeois had long held a deep fear of being swamped by their neighbours. They had always been eager to propagate the idea of integration, emphasizing that progress should be achieved by legal instruments and collective action. A long history of close cooperation with Belgium and the Netherlands, predating the EC itself, showed itself in the currency link with the former dating from 1922. Despite its small population, Luxembourg had no problem with all the roles required by its status as a member.

Precisely because it was so communautaire and disinterested in larger states’ rivalries, Luxembourg had been able shrewdly to manage its Presidencies. In 1976, it helped to institute the Troika, and in 1980 to stage manage the EC-Arab talks, the North-South dialogue, and the evolution of CSCE during the Solidarity crisis in Poland.

As a fully open and integrationist state, wedded to free trade (on which its industries had developed and its banking sector had become a leader in the EC in the 1970s), Luxembourg welcomed the internal market, especially the free movement of capital which greatly benefited its own financial services. It also sought EMU, after the 1982 currency crisis in which Belgium had devalued without joint consultation. (From then on it was clear that the Belgian franc would be tied to the DM inside the EMS.) Luxembourg had wisely reduced its dependency on the steel industry and expected unequivocal benefits from EC regeneration. Yet potential problems existed, chiefly in the field of harmonization, for its banks had no wish to fit in with German requirements on taxation – especially withholding tax – nor to change the laws on banking secrecy: the Luxembourg economy benefited too much to envisage a truly level playing field.

IRELAND

Entry to the EC had offered Ireland the chance to break out from its narrowly constructed, protectionist, rather bigoted provincial identity, to become a distinct European nation. By 1980, largely through its EC links, it had also escaped the long shadow of the United Kingdom and its poor and backward economy had experienced a greater recovery, and greater politico-cultural benefits than either of the other 1973 entrants. In the early 1980s, Ireland also enjoyed regular trade surpluses¹⁷ and financial transfer payments.¹⁸ In its economic aspect at least, the public was united: 83% had voted in favour of entry in the 1972 referendum and 68 7% were to vote for Maastricht in 1992, despite the fact that previously undreamt-of legal and constitutional implications had emerged.

New affinities with France began to replace the ancient ambiguity of cohabitation with Britain. In its first presidency in 1975, Ireland was able to stand up on the international stage as Garret FitzGerald addressed Commission-Council relations directly, having negotiated ably with the United States in Henry Kissinger’s day. It also subsequently played a mediating role during the second oil shock, despite problems with the European Parliament.

Agriculture benefited unequivocally from increasing specialization while industry drew in foreign investment, particularly from Germany, to replace its formerly sheltered sectors – though this came at the expense of local capacity. Despite the disruptions so caused, Irish governments retained their interests in liberalizing their domestic markets. But EMS membership, the only alternative to linking the punt to sterling, produced a hardening currency, welcome for its disinflationary effect but unwelcome in its impact on domestic production in the early 1980s. Some of this disadvantage was offset by transfers from the EC’s Regional Fund because all of Ireland still qualified for assistance.

Manufacturing and food processing would have suffered in any case from global changes. The prospect of a link between the internal market and structured funding helped to mediate this, and to curb any hankering for a repetition of the failed experiment in protection during the 1960s. Wisely, Irish governments used EC money and technology transfers to address structural failures. This was the overt reason for going forward to the single market, as the Dooge Committee recommended. But, as the Fine Gael party saw, structured change would be the real means to modernize the economy in the European dimension, to which a purely national market was an obstacle.¹⁹ This insight passed in due course to Charles Haughey’s Fianna Fáil government which, despite its historic tendency towards isolation, was content to accept that the country’s future lay wholly in the EC.

That there would be costs in unemployment, rising national debt, and disruption of rural society was not denied. The EC could moderate the pain, increase economic and social cohesion, and restore a measure of real independence to offset the surrender of formal sovereignty. This was a synoptic viewpoint, in sharp contrast with Britain’s, shared by farmers, trade unionists and most of industry, despite the predicted impact of EC imports on domestic market share: in the late 1980s and with the support of the Irish Labour party, it was to lead on to support for EMU and European Union.

DENMARK

Denmark, like Ireland, found itself faced by economic readjustments after entry in 1973, but without a basis of political consent. The EC had until then been presented as a superior sort of EFTA, a customs union with a few ‘political dreams’ attached. Membership was already a contentious subject and this was not alleviated by the first, unfortunate, Danish Presidency, which took office after only six months’ membership experience, at the time in 1973 when the oil shock hit the EC. The Social Democratic party remained as divided as the British Labour party, while fears persisted among the Six that the Danes would use the EC as a milch cow. These were dispelled during subsequent Presidencies: in 1978 by an unsuccessful Danish attempt to launch a growth programme, and in 1982 when, in Copenhagen in June, the odium for lack of progress fell on Britain.

Denmark’s complex and devolved decision-making processes ensured that in the absence of public consensus the passage to the internal market would be difficult. The White Paper’s mixture of economics and politics, and disputes between the government and the Folketing over whether EC affairs counted as foreign or domestic, made it hard for the government to take decisions and helped to produce an appearance of obstructionism.²⁰ At home, government usually won its case but at the price of later electoral retribution. To get the Single Act through, it had finally to by-pass the Folketing majority (80 to 75) with a national referendum (56.2% in favour, 43.8% against).

The internal market offered clear advantages to industry and consumers, yet morbid fears persisted about the EC’s bureaucratic centralization, and the portents of harmonization, as a threat to ecological purity from an overweening EC state. Without a clear mandate, the government confronted a range of domestic pressure groups which feared liberalization. But the Confederation of Danish Industries favoured the single market, in order to achieve a stable market for its few but globally oriented medium-sized companies. For them the EC was the home market, and although they disliked talk of industrial policy, they remained fiercely antiprotectionist. But the Confederation represented a small sector of the population with only 300,000 employees, fewer than Siemens employed in the EC.

Swayed by these pressures, and different oppositions, the government alternated between alliances with Britain (for example on aspects of the Dooge Report), and a claim similar to the Netherlands that institutional reform was essential to restore the EC’s dynamism. Denmark (whose currency link to the DM owed more to economic force majeure than political affinity) was seen therefore as contre: against inter-governmental action, political union, and EMU. It voted against an IGC in Milan in July 1985 but then later conceded, anxious not to be the only member state left out.

GREECE

Seven years after the end of the military dictatorship, the Karamanlis government from 1974 to 1981 attempted to modernize the Greek economy and transform Greek attitudes through the medium of the EC application. But this project (with intrinsically similar aims to those of Turkey) was undermined by the rapid rise of Andreas Papandreou’s ostensibly socialist but in practice populist-left party, Pasok, from 1977 to its election success in 1981.²¹ At once the Accession Treaty, hard won at home by Karamanlis with Franco-German backing in the Council of Ministers, came into question. It was the Pasok government and its leader, according to other members states’ opinions, who were responsible for the Athens debacle in December 1983 and, more persistently, for blocking the Commission’s new plans for standard-setting and mutual recognition.

Much of this could be ascribed to the inexperience of a small, relatively backward state emerging from a harsh military dictatorship; a measure of local demagoguery and political-administrative corruption was predictable. But Pasok’s ‘third world orientation’ and Greek reactions to the Turkish invasion of northern Cyprus in November 1983 estranged Greece from the EC’s mainstream, as could be seen from factious behaviour of large states during the Greek Presidency.²² Greece’s blatant exercises in renegotiation to gain maximum advantage early in 1982, and again before Spain was finally allowed entry, left Greek membership with few admirers and appeared to prove that Greece was prepared not only to milk the EC but to hold up its essential business in order to do so. Paradoxically, this helped to convince the waverers, notably Margaret Thatcher, that some measure of QMV was essential (see above, p. 122).

Yet the Greek government had serious problems to overcome at home, having to confront very inward-looking factions and an avowedly sensationalist press. There was good evidence of a will to do its EC duty, as the Pasok government eventually settled the quarrel over air bases with the USA and moved away from its third world policy, while the Turkish invasion helped eventually to introduce a period of learning on both sides. The appointment as secretary general of CEN (Centre Européen des Normes) of an able Greek engineer went some way to persuade the government of the internal market’s virtues. EC policy was managed by a small bureaucratic elite, running a weak, highly politicized state apparatus, often in confrontation with a volatile public opinion on which all opposition politicians capitalized. Greece’s final decision in favour of the Single European Act therefore represented acceptance not only of the internal market but of a change in Greece’s destiny, a western style of modernization rather than a traditional one, for which Pasok would have to educate their public.

Something should be added about Spain and Portugal, even though the internal market was to be part of the EC acquis that any new member would have to accept.

SPAIN

The small political elite who managed the long-delayed application process, firstly from Suarez’s centre-right basis, then after the 1982 election under the Socialist government of Felipe Gonzalez,²³ knew that entry would be a harsh challenge but that there was no alternative if the Spanish economy were to develop to EC levels and standards. (That there would be a second, more difficult, challenge with EMU/Maastricht in 1991 was not foreseen, although the peseta’s entry to EMS/ERM was always taken for granted, given the importance of creating an integrated financial sector). From the EC’s side, it was recognized that Spain needed a long period of transition before convergence could be completed, or there would be a balance of payments crisis, accompanied by devaluation and inflation.

Restructuring and upgrading the industrial base, together with banking and insurance, were the preconditions of adjustment, in which using not only EC support but attracting foreign direct investment from member states, the USA and Japan would be essential. Paradoxically, the Franco legacy lay less heavily on the economy than the effect of compromises made during the transition to democracy in the late 1970s, notably the Moncloa pacts made in October 1977 between the government and opposition parties acting variously on behalf of trades unions and management, which had accepted mild inflation, wage rigidity and employment security as the price of social peace. Trades unions’ growing powers, a highly restrictive labour code and index-linked wages soon produced much higher inflation which, despite the Banco de’ España’s austere monetary policy, stuck at 20–22% in the early 1980s, inhibiting inward investment, dividing the administration and setting the Bank against the Economics Ministry.

The Gonzalez government’s turnabout in 1984 (which can be compared to that of Mitterrand in 1983) made it possible to reduce money supply and public spending and to bring inflation down to 15%. Thereafter unemployment rose steeply, signifying that the Moncloa pacts’ legacy was dead. As the shocked unions wavered, a recovery began, leading to a boom which accompanied Spanish entry on 1 January 1986. Four years of rapid growth to 1990 brought high demand, high consumption, and a revolution in production – in which the long-sought foreign investment, led by West Germany, was a prime cause. That this policy mixture would lead to overheating became clear towards the end of the 1980s, but apart from joining the ERM no precautions were taken, despite pressure from the CEOE (Confederation of Spanish Employers) for matching supply side reforms,²⁴ which alone could make realistic Spain’s targets for 1992, open banking and free capital movements.

Since the accession negotiations were handled by the government, on the same basis of consent that occurred among the players on economic policy, Spain’s consequent acceptance of the internal market was taken for granted. The political parties, economic sectors (apart from agriculture which was seriously hit in the later and hasty stage of accession bargaining), and the Spanish public, increasingly well informed of the advantages by a liberated and lively press and television, accepted the package as a beneficial whole, so that there was no perceptible domestic opposition to the terms of the Accession Treaty. EC member states, however, could be in no doubt that Spain, with 8 votes on the Council of Ministers, would henceforward rank as a substantial European player, likely to be demanding on matters of regional funding, Mediterranean agriculture and social cohesion.

PORTUGAL

As the revolutionary years 1974–5 receded and memories of the forty-year dictatorship and the long preoccupation with African colonies rather than Europe faded,²⁵ Portugal looked to the EC to help it discover late twentieth-century normality. Shorn of imperial ambitions, the country had no future except in Europe: this much was a matter of agreement between centre-right (PSD) and centre-left (PS). Yet a still-strong Communist party and a nationalist Catholic right conditioned the balance of attitudes. Apart from the main banks (now state-owned) and a few large but declining industries such as shipbuilding and repairing, the Portuguese economy was still based in the south on Mediterranean agriculture and in the north on small firms, mainly concerned with textiles. A backward infrastructure, low levels of education, and a GDP per head of only $3500, below that of Greece (which most observers at the time expected to perform better), ensured that its transition would be prolonged and difficult.

But the small political elite had no difficulty in convincing a public tired of isolation and the heavy burden of having lost a colonial empire, that EC membership was the only way to avoid being relegated to the impoverished periphery and swamped by Spain. The problem lay in deciding between the primarily economic hopes of the minimalists (who included both the communists and the socialist left, as well as the nationalist right) and the centre, which accepted a broader measure of integration. Overall, apart from the ardent federalists, who included President Soares, a concern with sovereignty and national identity inhibited support for monetary union, as it did in Britain, though more so perhaps because of frequent escudo devaluations to aid exports. Living in the shadow of Spain, the Portuguese were jealous of small member states’ rights, yet conscious that, if they were to benefit and complete the process of modernization, they had to show themselves to be good Europeans.

Yet by 1985, Portugal possessed not only an open economy – partly as a result of the tough IMF-imposed programme in the mid–1980s – but an international awareness and important links with southern Africa and Brazil. Though few, its Brussels representatives were to prove themselves able and cooperative. Community decisions were all made at the centre, almost uninfluenced by civil servants and not at all by parliament. The public, conditioned by the ten-year-long liberal PDS government of Cavaco Silva, accepted integration and seem barely to have distinguished the EC from the world at large.²⁶ The influence of industry and farming interests, along with the small role assigned to consumers, can be compared with the situation in Ireland, but the survival of a strong Communist party ensured a stronger role for organized labour.

Like Spain, soon to be Portugal’s largest trading partner, the country was to experience boom years up to 1990, buoyed up by German and Spanish investment. But at the time when the date was set for completion of the internal market, there appears to have been more widespread awareness than in Spain of how far the abolition of tariffs, free movement of capital and transition to the CAP would affect all aspects of Portuguese economic and social life. Hence, while in favour of the internal market, the Portuguese government argued that it was not yet ready, and remained defensive, arguing for a higher levels of support for social cohesion, regional funds and Mediterranean agriculture, while at official and presidency level living up to the ‘good European’ expectation.

On the central issue of the internal market, all ten member states had thus come roughly into line – albeit for different reasons – by the end of 1984. So had the other major players across Europe, industry, finance, even labour – insofar as that had recaptured its European presence. But it needs to be asked to what extent these rather than governments actually determined the outcome.

Financial sectors certainly took little part in the internal market process. The Fédération Bancaire Européen (FBE) had had to react so far to only one major Commission proposal, the first banking Directive of 1977. So long as the quiet years continued neither side wished to stir things up. In the absence of Commission activity, there seemed no urgent need to react to competition from American and Japanese banks, while insurance companies and stock exchanges barely stirred. Even when banks did get their fingers burned in the ‘sovereign debtors’ crisis, they tended to seek global remedies via spreading and insuring risks.

Even central banks involved themselves only when the Single Market White Paper had been assimilated and monetary union come into focus as a consequence. But deregulation, particularly in Britain after 1983, led to an exuberant period of often ill-judged growth and acquisitions, followed in due course by competition in all markets for capital and financial services; excess capacity ensued, followed by retrenchment – and the same choice that had already faced key industries, between managed and market-led restructuring. Thus the market cycle, as much as changes in the formal financial environment, ensured that they would enter the EC game in the end.

Political scientists and contemporary historians dispute how far ‘industry’ can be seen as a coherent player in this game.²⁷ Up to the late 1970s there was certainly no consistent evidence that large or multinational firms, though they were regular players at official level, had been recognized in formal Community bargaining. Insofar as they operated informally, they did so at national government level or through personal links with officials in DG3, so that with the exception of American and Swiss MNCs, which tended to go direct to both the Commission and the Parliament, influence seeped almost imperceptibly into both member states and Commission plans. The results of what they did therefore varied, being at national level more effective in France, Germany and the Netherlands than in Italy and Denmark; and at Commission level, more with DG3 than DG4. Indeed a presumption existed in most of the sectoral federations that DG4’S competition brief inhibited informal links with corporate interests, and that any formal ones should run via UNICE. Since those directives which got through the early 1980s log-jam were still framed in terms of technical harmonization, usually in the food processing industry, and since DG3 perpetuated the industrial sponsorship ethos to their satisfaction, firms and federations themselves saw no need to do more.

But when Etienne Davignon rebuilt DG3 on the Spinelli model, adding to it technological development and foreign trade elements, together with rationalization of the steel industry, this complacent attitude changed rapidly. The twelve major information technology firms willingly took part in Davignon’s research initiative which led to the promulgation of ESPRIT in 1984. On a wider scale, European corporations who benefited substantially from it generally saw the grand structural adjustment plan as a benign way to offset otherwise unacceptable political and financial imperatives from the recession of the early 1980s: redundancies, real wage cuts, benefits reductions, and some of the heavy cost of high-technology capital investment.

Considerations such as these led inevitably to firms’ preoccupation with the internal market’s potential advantages, and complemented what was always in France, and also now in Spain, a thesis about general modernization. If CBI records are typical,²⁸ this recognition can be dated to 1980–81; that is, contemporary with Davignon’s initiative.²⁹ However, at first its impact was confused by the vigorous polemic over Vredeling. UNICE however was not to be the vehicle, but instead a ‘high level’ informal group, aiming directly at Brussels and heads of government.³⁰ Neither were sectors or peak organizations chosen for permeation: few of them were as yet so well based in Brussels as the Americans, and AmCham’s European Committee. But the informal groups, of which the European Round Table (ERT) became the most influential, had greater effect in the earlier period, 1982–4, when they operated informally, than afterwards. Having, as it were, gone public, they became animators, adjuncts to, rather than initiators of change. The influence of the firm has therefore to be measured in the interstices, in rivalry with louder views coming from the Parliament such as de Ferranti’s Kangaroo Group, and the 1981 Nicholson Report which claimed that the EC was ignoring industrial uncompetitiveness.

Yet this is to measure matters only on the EC stage. Some member states had gone down the Davignon road, much earlier – Britain with the Labour governments’ late 1970s Industrial Strategy, France with the Plan Barre, Germany with the Modell Deutschland. Though sectors of British government took a different view in the early 1980s, the DTI was still eager to engage the CBI’s services in its 1981 campaign for the internal market: clearly (despite the rupture between the Thatcher Cabinet and the CBI) a basis for general consensus still existed, at least in the high technology race. Something similar occurred in West Germany as the heads of much of industry came to a central standpoint on the internal market. Their French counterparts followed suit around 1983. AGREF (the Association des Grandes Enterprises Françaises), noted the conjuncture. The idea grew rapidly, according to one French company executive: ‘Europe is a kind of domestic market… the foreign markets are in America and south east Asia.’³¹ The CBI and DVI, together with support from the CNPF or Patronat and Confindustria, therefore took part in Delors’s later ‘vast consultation’ with heads of enterprises across Europe. Governments in effect used their giant firms and federations to influence the Commission, complementing what national representatives were already doing in the Council of Ministers. Who used whom, and who if any one actually set the agenda, is almost impossible to decide without access to EC archives.

What matters here is that in this game, private associations like ERT were encouraged by governments and the Commission to behave as privileged actors; individual industrialists, usually with their firms’ long-term strategic advantage in mind, willingly took up the roles. UNICE, which began to call for QMV as a solution to the log-jam problem in February 1984 came later, counted for less, and was used by the Commission rather as a source to disseminate information and Commission messages. (Even less can be ascribed to the ‘Jean Monnet Committee’, reborn at the end of that year.)

The European Round Table (ERT) stands out, firstly as a collection of industrialists who led firms that were highly important, being multinationals oriented towards investments (which the Community could hope to stimulate by incentives) in telecoms, road and rail transport, and research and development. Secondly, they acted as an influence personally on Jacques Delors before, and for a short time after, he took up the Commission Presidency in January 1985.³² It was first established with Pehr Gyllenhammer (Volvo) as chief executive – a useful non-EC catalyst – and its members included Umberto Agnelli (Fiat), Wisse Dekker (Philips), Pierre Defraigne (France), John Harvey-Jones (ICI), K. Durham (Unilever), H. Maucher (Nestlé), C. Nicolin (ASEA), A. Riboud (BSN France), D. Spethmann (Thyssen), Sir Peter Baxendale (UK Shell), R. Fauroux (St Gobain), B. Hanon (Renault), O. le Cerf (Lefarge Coppée), H. Merkle (Bosch), L. von Planta (Ciba-Geigy), W. Seelig (Siemens). It had valuable links with Davignon and his successor Narjes, Fernand Braun, and Ortoli, and in that sense furthered the Commission’s idea of a pan-European, synoptic approach which was neither socialist nor corporatist. Its main general proposal was for a ‘Marshall plan for Europe’ (January 1983), the result of much debate about how to achieve reindustrialization; its main special report was written by Wissi Dekker, on behalf of Philips, in 1984 and published in January 1985.

Private and informal influence had had most effect before these publications, during 1983, in particular on the Franco-German element in the Stuttgart Declaration.³³ Specifically, ERT focused directly on decision-makers (unlike the coordinating body, European Enterprise Group), proclaiming the importance of non-tariff barriers and the lack of standards, which the internal market was intended to remedy. Its suggested solutions – contained in slim, well-produced pamphlets, somewhat tinged with protectionism – were aimed at political leaders, in contrast to the more detailed literature from UNICE. What mattered most was its animator status, given the point already reached by the Commission and the German, British and French industry ministries. As Maria Green suggests, its influence was used in the direction of a unified rather than a common market, and to bring a much needed pragmatism to the debate;³⁴ however, its later, more formal work also fed back into those member states which had stimulated it in the first place, so that it tended to replicate national lines of thought, whether for defensive adjustment or free market openness. This probably explains the CBI’s 10% area of disagreement with the Dekker Report and the DTI’s rather greater degree of divergence, enhanced of course in Margaret Thatcher’s speeches. In its crudest form of differentiation, the British version embodied an unrest-cure with contingent unemployment and bankruptcies while the German and French ones propounded a state- and industry-managed restructuring at minimal social and economic cost.

Given the momentum among governments from mid–1984 onwards, ERT’s later contributions have to be seen as supererogatory, part of the heightened climate of awareness about venture capital, completion of ‘missing links’ in the infrastructure (such as the Channel Tunnel or the EC-Scandinavian road/rail bridge) and the individual projects such as the European Technology Institute, for high-grade postgraduate training.³⁵

As for the firms themselves, who in a mere three or four years were to flood into Brussels to establish influence in what now appeared to be the epicentre of commercial advantage, it is impossible to isolate their individual weighting.³⁶ Most had a vested interest in the process, as they demonstrated in the wave of mergers, joint ventures and takeovers – in consumer durables, office equipment, metals, agribusiness, airlines (though these mergers all failed), press and television and venture and finance capital – which occurred even in advance of the Single Act, 1985–6, usually with Commission support.³⁷ Firms in the lead here included Thomson, Zanussi, Olivetti, Pechiney, Ferruzzi, Cerus (Olivetti), and entrepreneurs such as de Benedetti, Maxwell, Berlusconi (several of which, as a result, became grievously overstretched by the early 1990s).

American firms, feeling themselves losing market share worldwide to the Japanese, especially in semi-conductors, banking and financial services, were meanwhile extracting special concessions in the United States and many varieties of protection from the compliant Republican administrations of Reagan and Bush. As a result, there emerged a barely veiled policy of trade through bilateral agreements which seemed to have become, by 1985–6, as great an impediment to the current GATT round as anything emerging from France or the EC. The situation generally worsened with the US Trade Bill of 1987. In the critical areas of cars, semi-conductors, telecoms, and consumer electronics, the EC reacted less stringently (since American companies, organized in AmCham’s European Committee, had long since operated within its borders)³⁸ than it did against Japan. Nevertheless, the Commission disliked the mid–8os regimes of VERs, quotas and tariffs, imposed by member governments acting together in Council, which officials believed only emphasized the bankruptcy of inter-governmentalism and the virtues of the Commission-led internal market process.

The Commission had developed its own scheme in 1983 in the limited field of mutual recognition and standards introduction: ‘limited’ (in DG3’s view) meaning the most that member states would permit. Thereafter, it seemed as if Stuttgart had produced only rhetoric, of little value in daily transactions. Narjes’s long summary of uncompleted items emphasized the backlog, without shaming the Council into advancing the project. Fontainebleau gave no particular encouragement to the internal market. As late as November 1984, when Delors put his four questions to the member governments, he himself was inclined towards institutional reform: it was the negative responses to that which convinced him that only the internal market could proceed.³⁹ His first speech to the Parliament, on 14 January 1985, with its call for ‘completion of a fully unified internal market by 1992 (with) a realistic timetable’ may have represented a Commission-led breakthrough.

But that ignores the fact that the 1983 efforts by officials had only been postponed. One close participant points to ‘the Commission’s internal dynamic which… used the multinationals; and also the pressures coming from the Parliament to get away from “non Europe”’, which pre-dated Delors’ activity. Allowance should also be made for the ECJ’s influence: what had begun with the Continental Can case 1972 (see above, p. 96) was renewed in the Philip Morris case of 1981, when the ECJ used Article 85 rather than 86 to lay down the considerations pertaining to cases of mergers and concentrations. The issues of merger regulation and limiting state aids did not disappear from the Commission’s agenda with the Council’s rejection of the Draft Merger Regulation; that this area of the internal market required the work of two far-sighted Commissioners, Peter Sutherland and Leon Brittan in 1986–92, may in fact be a tribute to the delaying capacity of certain governments and industries. Then, as later, the many-faceted interaction of President, college of Commissioners and Director-Generals, has to be seen as itself a competitive symposium operating on a much longer time cycle than those of national governments or firms.

Delors’ questions offered the twelve governments four choices of how to recapture the EC’s momentum: monetary union, foreign policy and defence cooperation, institutional reform, and the internal market. Apart from France, no member government chose anything but the latter; yet few supporters felt strongly about it. On the evidence of his own writings, Delors reckoned that it would take two full four-year terms of office: the first up to 1988 to get the Single European Act, the second to 1992 to complete it;⁴⁰ so his rélance to the European Parliament was to be read both as a proposal for a Europe without internal borders, and a long, politically radical project for what that Europe was to become.

The concept of a single market had by then been agreed between Delors and the key Commissioner, Arthur Cockfield, who had been appointed by Margaret Thatcher to succeed Christopher Tugend-hat who was now out of favour. That combination, and the greatly enlarged competence which Cockfield requested at DG3 (financial institutions, company law, VAT and indirect taxation) set him in a position of greater directive power than Davignon had ever possessed. Cockfield could therefore provide sole authorship as well as conceptual force for DG3’s work in preparing the White Paper, and a unique preponderance in the Commission college. Davignon’s pragmatism and Narjes’s preparatory work infused what was done, but the logic and intricate cooperation between Directorates owed most to their successor.

Thatcher had given Cockfield a brief ‘to make the internal market work’. His early investigations led him to agree with Delors that any target date before 1992 would be unrealistic. He had no illusions about the lukewarm involvement of most governments, even though the Luxembourg Council (following the Dooge Committee Report) endorsed the target. Consequently the White Paper had to contain a precise schedule of all the components, amounting to nearly 300 items for legislation, a deadline (1 January 1993), fully elaborated concepts of mutual recognition harking back to Cassis de Dijon, tax harmonization (a favourite of Cockfield’s) and some measure of supervision to keep member states in line during the process of implementation. The programme had to be coherent, interlocking, yet distinguished from the social, environmental, competition, investment and monetary issues which were contingent on it, but which, for political reasons to do with member states, could only be incorporated later.

Member state governments may have been unanimous in their welcome for some sort of internal market; but how much they foresaw of the White Paper’s actual details or its contingent elements is unclear. Cockfield took his tutorial mandate to the limit, composed the document as if the political will already existed (as the founding fathers had done in 1957) and wisely circulated it only ten days in advance, giving time for governments, civil servants and permanent representatives to evaluate it but not to draw up counter-proposals. He prefaced it by citing every endorsement that ministers had given, from Copenhagen and Stuttgart onwards: they had willed the ends, here were the means. Despite this care, and despite the low-key, almost bureaucratic tone, objections were at once raised, from other Directorates and from some of the industrialists, who sensed how far it reached beyond the Dekker Report. But Cockfield refused to tone it down. Indeed, being well aware of its impact on financial services, he used other industrialists and City of London figures to propagate what he claimed was the only way to end ‘this prolonged period of uncertainty’. He was rewarded when, at the Milan Summit, the Council instructed the Commission to prepare a plan of action, within the timescale which Cockfield had envisaged from the beginning in his critical path analysis. From this point on, ministers began also to come to terms with QMV, which had been evaded at Dublin the year before and which Cockfield and Delors knew would be essential.

During the French Presidency in 1984, President Mitterrand had also made a tour of European capitals with a ‘relaunch of the EC’ in mind. From this came two significant understandings, the first between Germany and France on institutional reform, (even though France still hesitated at the further powers for the European Parliament apparently required by both Germany and Italy), and secondly between Germany and Italy on market liberalization.⁴¹ The British government, secured temporarily in the Fontainebleau budget concessions, grew uneasy about suggestions in Paris about an EC of different speeds, if not necessarily a two-tier approach, especially when, addressing the European Parliament on 23 May, Mitterrand presented, with some panache, a view of Europe’s federal destiny and a mordant commentary on how to face le défi Américain – the US challenge.

Much detailed diplomacy was necessary before the Twelve could broker even the beginnings of a compromise, ready for the Milan meeting in October 1984. Mitterrand was now reforging the entente with Germany, hoping that Maurice Faure’s presence as rapporteur of the Dooge Committee (consisting of heads of governments’ personal representatives) would maintain France’s version of how institutions should be reformed during the Irish Presidency. Because of British preoccupations, QMV remained a central issue for the Dooge Committee, whose deliberations were mainly concerned with institutional and constitutional issues.⁴² But the Committee’s high-level membership, and its reluctance to discuss issues of detailed policy, made it an unsuitable vehicle for inter-governmental competition to set the social and political matrix of the internal market, which may well have influenced Margaret Thatcher to look to Cockfield for a more cautious and and empirical approach. In the end, after sifting the potential impact of various important consequences of the internal market, including the Luxembourg Compromise, the numbers divided seven to three on the key question of QMV.

The Dublin Summit which considered Dooge’s interim report had therefore to fudge the main issue for lack of a consensus; and gave a very nuanced, even contradictory line for Milan. But there was enough acceptance by the majority – which did not in fact exclude Britain – to indicate that the seven to three tally, reaffirmed in relation to the need for Treaty amendments and an IGC (during the March 1985 Council meeting in Luxembourg), could be adjusted. Britain was in the process of modifying its position and making overtures to France about a common front. Geoffrey Howe put an able defence of a British plan for QMV without an IGC, at Stresa, in May.⁴³ But his proposal was pre-empted when Mitterrand and Kohl drew up their ‘Treaty of European Unity’, to coincide with the fortieth anniversary of the end of the Second World War. What appeared in London to be fresh evidence of the Franco-German entente angered Thatcher and may have contributed to her being manoeuvred into opposition at Milan; she seems not to have been aware until too late that Kohl had also concerted his tactics before the Summit with fellow Christian Democrats in Rome and probably also indirectly with Craxi and the Italian Socialists.⁴⁴

The Milan Summit took place after assiduous lobbying by all the minor players. But Italy held the Presidency, and the leaders of the pentapartito, Giulio Andreotti (DC) the foreign minister, and Bettino Craxi (PSI) the prime minister, sought above all to have an IGC in order to ensure that political cooperation and wide-ranging institutional reforms were incorporated. This would have been impossible without amending the Treaties. The Italian proposals were intended to ensure better decision-making, more Commission power of initiative, a Court of First Instance to ease the ECJ’s overload, and larger powers for the Parliament – a substantial part of which went beyond what Kohl and Mitterrand had agreed. After a confused debate, Craxi called for. a vote under the simple majority procedure covered by QMV, and obtained the required and predicted seven to three result: Britain, Denmark and Greece being in the minority.

The British were scarcely surprised at this outcome. Later on, Thatcher argued that her willingness to cooperate had been misconstrued. But for the other heads of government, having an IGC was crucial. At the time, Thatcher accepted that her prior element of acquiescence in QMV (even on the basis that there was no need for an IGC), and the importance for Britain of limiting further progress to no more than the White Paper’s proposals, justified all-out participation once the IGC had been set up by the the majority. (As Howe put it: ‘member states had to be checked from hanging more baubles on a mobile Christmas tree.’)⁴⁵ But before the IGC opened at Luxembourg on 9 September, the White Paper was already being subsumed in the wider Commission design.

Cockfield had envisaged that his White Paper’s approach to the demolition of three sorts of barriers – frontier, technical and fiscal – should continue to guide the internal market’s evolution, whatever came out at the IGC. Only later would tax harmonization, for example, be incorporated. He had confined it deliberately to the industrial sectors to be liberalized and had not touched on competition, regional policy or the agricultural implications, since he did not intend it to serve as the basis for a more general (and potentially over-ambitious) policy. Nor did he imagine that the internal market would lead directly to EMU (though the Dooge Committee had considered reform of the EC’s monetary system). These dimensions became clear later, for example in his introduction to the Report of the Cecchini Committee, which had been set up to convince member states that the single market would produce not only great but quantifiable benefits.⁴⁶

How much was in fact afterwards made to seem contingent on the White Paper can be gauged from Cockfield’s later phraseology⁴⁷ and the fact that he responded to a question by Cecchini, whether or not to state flatly that the single market required monetary union, by asking him ‘not to overload the boat’ at that stage.⁴⁸ At the same time, other Directorate officials, looking ahead, were preparing their own complementary proposals in the fields of competition policy, mergers, state aids, and overseas trade.

But while pressing the White Paper on governments prior to the Milan meeting, the Commission Presidency and some member states were also engaged in widening the whole concept to include what they regarded as a more balanced programme, including socio-economic policy, environmental action, institutional reform and political integration (which Delors had already outlined to the European Parliament in January), together with social cohesion in the light of Spain’s and Portugal’s accessions. All this stood in clear contrast to the British interpretation, but in line with the opinions of Laurent Fabius and Elizabeth Guigou, who were in charge in Paris. In October, Delors criticized the British ‘supermarket approach’, and set out his own conception of a ‘real Common Market’ including political solidarity, EMU and cohesion. Here in essence lay the idea of a European developmental state and of an economic space not restricted to the Ten, because these had imagined from the start that it would, in due course, be extended to EFTA countries.⁴⁹

It was these proposals which Luxembourg’s Presidency, the next in line, set itself to implement, as an essential adjunct to fulfil the single market according to the contingency formula. Over time, through intricate negotiations in the IGC, Luxembourg’s subtle and neutral approach served to reduce the suspicions of both the Danes and the British. However, the Danish government promised its people a referendum (and Craxi in turn pledged that the Italian parliament would vote only after the European Parliament had given its approval, thereby conveying to the European Parliament a sort of informal competence).

The outcome owed something to cooperation within the ‘Troika’, as Luxembourg eased the agenda from drafts to final texts with few votes but always ‘noting where the majority lay’; But the primary momentum came from the fact that all twelve governments wished to see the internal market come to fruition. Some participants concluded that the British alternative scheme’s intention had come about and that in this area the national veto had already died.⁵⁰ Ireland’s assent (postponed for two years for legal reasons, to meet the Irish courts’ insistence and followed by a referendum) was actually taken for granted by the Belgian Presidency in 1986, as if QMV already existed.

Five IGC meetings sufficed to bring the documents to two Council meetings in December 1985. Divisions and alliances between states varied according to the issue being debated. Real disagreement however centred on four main questions: which single market decisions were to be taken by QMV? How far should cohesion extend, and in what form? How should cooperation and co-decision with the Parliament operate in foreign affairs? What place should be given to EMU?

None of these was susceptible to a simple solution and the wider implications of each ran on to Maastricht and beyond. The text on EMU divided France, Belgium, Italy and Ireland, all of which thought it too weak, from Germany and the Netherlands which wanted the relevant articles attached to but not incorporated as an integral part of the Treaty. Britain did not want either, or indeed any reference to EMU, certainly not before the internal market’s complete freedom of capital movements had been achieved.

The arguments had no empirical basis, except in current practice in running the EMS and ERM, Britain not being a member of the latter. But the eventual compromise rested on promises from France and Italy to liberalize their exchange control provisions – promises which were turned into a guarantee of abolition before the single market deadline came, at an ECOFIN meeting in June 1988, just prior to the Hannover Summit. Meanwhile, the preamble of the SEA was given three indents referring to the ‘objective of EMU’, together with a chapter stating that the member states should cooperate to ensure the convergence of economic and monetary policies.

On this somewhat ambiguous basis, EMU was to be included in the pre-Maastricht process. The Single European Act retained majority voting for all EMS decisions, so that Britain could still exercise a veto, even though it was not in the ERM. Nevertheless, two years later at Hannover, the UK government did concede that the Central Bank Governors Committee, chaired by Delors, might examine ways of setting up the future European central bank, and the ‘concrete steps’ towards EMU long sought by France.

An increase in structural funds (coherence policy) to appease Ireland’s and Greece’s fears about the impact on their economies, eased the Act’s passage, up to its ratification by nine governments in February 1986, and by Ireland more than a year later. Some member states seem not to have realized how large these sums would be, when measured afterwards in relation to Iberian needs. It also brought a trade-off between the German federal government and the Länder (led by the Bavarian and North Rhine Westphalia prime ministers, Franz-Josef Strauss and Johannes Rau, which gave the Länder increased rights of participation in decision-making in Bonn). These were to be a foretaste of the regional compromises made at Maastricht in 1991. Success in the IGC negotiations, reform of the CAP, and extension of QMV to financial services’ liberalization, satisfied British ambitions. The Italians got their extra powers for the Parliament,⁵¹ the Netherlands and Belgium achieved an extension of political cooperation, Germany a clearer definition of regional policy, and France its hopes of EMU. From all this stemmed the mood of euphoria leading on to Maastricht.

But that was only the legal framework: much space remained for Commission interpretation. Officials’ creativity during the next six years improved on what had actually been agreed, while members transposed what eventually became the 285 legislative enactments, in order to meet Cockfield’s deadline of 1st January 1993. Among the twelve governments, opinions inevitably varied. (Margaret Thatcher particularly resented the way the Commission used Articles 100 and 235 to obtain ECJ confirmation of its interpretation.⁵²) It was not clear until the Hannover Summit in June 1988 that all the heads of government had ‘irreversibly accepted’ the SEA: indeed the Act deliberately had not made the 1 January 1993 deadline a legal obligation, so that the internal market would not be final until all its provisions had been transposed and implemented. Whereas transposition had nearly been completed by the 1st January 1993, implementation still fell far short.

At the time of Hannover, 194 out of 285 legislative items remained to be completed. But the breakthrough on exchange control abolition had come. The legislative programme no longer depended on each six months’ Presidency (which was as well, since the Greek government attempted to turn the proceedings after Hannover in the direction of social policy, training and worker consultation, which would inevitably have aroused industrialists to make a renewed ‘Vredeling offensive’.⁵³) Member states’ mid–term failures to transpose legislation were already being remedied by an informal system of mediation, réunions paquets (see below, p. 628). Great as the delays were to be, even beyond 1992, the main technical problem after Hannover lay not with visible barriers but the implicit ones, created out of ‘exceptions’ through which member states continued to defend their chasses gardées long after they had conceded the former. Although Hannover represented a political landmark, ‘beneath its calm surface, the battle between liberals and interventionists for control of the 1992 project was at last launched.’⁵⁴

In the two and a half years after the IGC, the game between states, Commission and industrial players continued,⁵⁵ complicated by the entry of new players from Spain (which played a part in the second Banking Directive). Most of the advantage, however, accrued to the Commission, which did not seek to hide its wider design but only to nuance it for different audiences as the next stage – harmonization of VAT, excise and corporation tax – approached.⁵⁶ The Commission concentrated, for example, on reducing national restraints on air transport and the carriage of goods, and on the agreement over car imports with Japan. Officials accepted that some implementations would be delayed beyond 1 January 1993, particularly by Mediterranean countries (especially those concerning Spain’s financial services and Italy’s state industries), but relied on the states’ commitments, sealed at Hannover, to limit delays to an acceptable level.

Having been very largely excluded during the bargaining process from Milan to Luxembourg, the Parliament also increased its part during later stages of the single market negotiations, as Cockfield steered his enactments through. Some 260 legislative items remained after the Act’s second reading, together with a host of amendments, and in the process MEPs acquired a power through practice which they were later to consolidate at Maastricht. This extended informally to areas where MEPs had no direct competence at all.⁵⁷

The financial sector also emerged as a player, now that EMU’s shadow lay over the internal market. Banks and insurance companies, at least in the northern states, joined the various action groups and some even took part in public campaigns for 1992 through their domestic press and television. Huge financial gains were being made in these sectors by 1988, much greater than Cecchini had forecast; more in France and Germany than in Britain, but most of all in Italy and Spain, where the least open markets operated.⁵⁸ Harmonization affected all securities markets and stock exchanges, and Spain went through its own ‘big bang’ in 1989–90, as London had done eight years earlier. Nothing was invulnerable to foreign access, not even long-closed insurance and mortgage finance sectors.

Previously, these had been heavily protected areas: in Germany, insurance protection law meant that all policies were similar, with strict tariffs, so that innovation was impossible. This was in complete contrast to the competitive market in Britain, which regulated intermediaries, not policies. In France it remained a criminal offence for non-French companies to sell any sort of insurance. Some liberalizing had been achieved by the EC on life and non-life policies, but full market freedom was not actually achieved until 1990, after nearly twenty separate Commission drafts. Until then, the governments of Germany, France, Belgium, Italy, Denmark and Luxembourg resisted any change, to the unconcealed fury of German companies and all multinationals. It was no wonder that Cockfield avoided legislating for this sector, relying, as 1992 approached, on the single market’s momentum to do the job.⁵⁹

Talk about ‘Europe à la carte’ and ‘variable geometry’ during the Presidencies of the Netherlands, Britain, Belgium and Denmark in the years 1986–8 revealed how fortunate the EC had been in the previous year under Italy and Luxembourg. Britain was evidently keen to prevent the emergence of a contingent social policy dimension. As the Thatcher decade neared its end, and as she herself attempted to limit any broadening of the single market concept, Britain seemed once more to be at loggerheads with the rest. Among member states, it seemed as if the impetus had been lost.

The breakthrough under Germany’s Presidency at Hannover can be explained partly because of France’s occlusion, during the tense period of ‘cohabitation’ between Mitterrand (who during a long duel between Elysée and Matignon managed to retain power over foreign and EC affairs) and Jacques Chirac’s RPR government, and partly by a convergence of opinion between Bonn and German industry on the substantial opportunities for Germany offered by the internal market. The Hannover Summit also indicated that West Germany had committed itself to political, if not yet monetary, union.

Even then, some elements remained uncertain, such as harmonizing VAT, which was fought out between Cockfield (who sought a 17% rate) and the responsible Commissioner, Christiane Scrivener (who proposed a 12% one), at ECOFIN meetings under the Greek Presidency in late 1988. The British government again objected to the principle of harmonization, but in the long run, when Norman Lamont was at the Treasury in July 1992, accepted it as an irreversible matter – one essential for raising government revenue during the 1990s’ recession.

The years 1988–90 were good ones in the EC, which saw a rise in corporate profits, individuals’ living standards, and their expectations (at least for those in work, and above all in skilled or professional work), as the boom swept towards its crescendo. European directors of Ford, IBM or Exxon had long seen what Cockfield’s timetable presaged, as did some Japanese multinationals, and were now eager to set up inside the EC before the 1992 deadline. More and more giant firms such as Rhône-Poulenc (chemicals) and Philips (electronics), and Daimler-Benz (cars), opened offices in Brussels, where lobbyists multiplied, pari passu with the Commission’s output of SEM directives, giving greater complexity to the game. Many of the deals or joint ventures made in this period (British Leyland-Honda, Fiat-Sikorsky and Westland Helicopters, together with Siemens-GTE (USA), CGE-AT&T, and Telefonica-Fujitsu (in telecoms)) suggest that multinationals were actually demonstrating what a single market implied and perhaps defining what EC industrial policy and trade policy in the future should be.

But the most obvious result of Hannover was a renewed mood of optimism, and a determination to consolidate the entire project of monetary and political union. Cecchini had dealt largely with once-for-all benefits deriving from the original White Paper. But by 1989–90 it seemed that, if the single market did help to solve the underlying problems of the EC’s overall adjustment, the gains to be expected after 1993 would be vastly greater – at least for the northern European states – than he had predicted, not least because adjustment could provide means to counter US, Japanese and south-east Asian firms’ market penetration.

In that sense the achievement of an internal market, though the direct consequence of the Single European Act, cannot be isolated from the wider process which culminated at Maastricht in December 1991. For a relatively short period, member states accepted what had already become common sense in the business and financial communities, that the internal market’s likely gains offered greater advantage than earlier economic defensiveness. There could be no value in being the last to come in or the least conciliatory, since the game had ceased to be a zero sum matter; such defensive stances risked being overruled or gaining nothing, whereas the propensity to bargain represented an attractive alternative.

Yet member states’ ratification of the Single European Act hid a number of individual government reservations and, in the British case, perhaps also misconceptions about what had been accepted by the others and the Commission as logical corollaries. Hannover marked a point of political assent to the concept of a rule-based system in which sectional opting-out or evasion would become unprofitable, just as the pledge on EMU provided the necessary technical accompaniment (apart from Britain and Denmark) to avoid unmanageable distortions in the new market and the CAP. That in turn brought huge pressure on Britain and Spain to enter the ERM if they wished financial liberalization to reach its apogee.

The way the internal market was made cannot be isolated from the international context and the Gorbachev era of apparently ultimate détente, followed by the collapse of the Soviet empire in 1989–90, which opened up the countries of eastern Europe to new forms of exchange with the EC. West Germany’s leadership at Hannover prefigured its likely stance two years later as the Wall, and its accompanying psychological walls, came down.

Peter Sutherland, the Commissioner responsible for competition policy, had been appointed to lead the high-level Group on Operation of the internal market, in order to assess how best to achieve the full benefits Cecchini had promised. In his report, analysing post-1992 problems in managing the internal market, he pointed out that the Community’s main functions would now be to administer the rules, monitor member states’ compliance, improve their means of doing so, spread an understanding of the law to ensure consistency and transparency, and generally help to create a climate of shared responsibility in which the Commission would henceforward rely on member states’ competence and expertise, and on their courts for enforcement. The Single European Market was to become the core of a new EC geography which would in turn redefine the relative positions of Commission, member states and ultimately regions. But even in his chosen areas of goods and services, a great deal remained to do.

If this represented a new stage of partnership between them, it was clear from what Sutherland said that the Commission would have to accept some informal degree of diversity in practice among the Twelve, whatever its formal legal standpoint. The advance on the previous decade was nevertheless enormous, whether the Single European Act is depicted as the result of a tacit contract between all twelve member states or of a number of parallel decisions by each government about relative advantage. Either way, each player would respond to the rules, not because of the sanctions (which were negligible and had often enough been evaded in the past) but because of the severe and increasing costs of not doing so. Nevertheless, a number of substantive contingent questions remained to be settled, including the emphasis to be given to competition policy, and the Commission’s place in developing industrial and external trade policies, research and technology programmes. The Act nowhere stated that Article 115, which gave powers to take protective measures against non-European imports, would be removed; neither did it lay down details about progress towards monetary union – if it had, its passage would have been immeasurably harder.

Political problems also remained. When the British government argued for its own draft proposals for single market management before the Edinburgh Council in December 1992, several EC ministers contested the UK’s underlying philosophy, on the grounds that it reverted to the inter-governmental style and failed to acknowledge the Commission’s leading role.⁶⁰ Representing France, Elizabeth Guigou also objected to the UK’s unwillingness to face up to the free movement of people, without imposing passport formalities. Yet on this obstacle to the Act they had already signed, the UK, Denmark and Ireland stood fast against the rest. Single market issues thus ran on, into and beyond Maastricht, to be affected by the recession of the early 1990s and member states’ increasing unease at the consequences of events in eastern and south-eastern Europe.

Taking the process from the early 1980s as a whole, it is clear that the closer the internal market came to fruition, the more it suited both member states and the Commission to cooperate and enjoy the heady mood of harmony after so many debilitating, stagnant years. In this sense, the mid–1980s represented a turning point. Afterwards the Community showed itself better able to face up to extended competition, to direct American and, later, Japanese investment (US investment had decreased during the recession of the early 1980s, as had European companies’ own investments in the EC). The majority of governments, in sharp contrast to their behaviour in the 1970s, also began to turn away from the defensive, non-tariff barriers which they had erected earlier on to delay harmonization.

Four deep modifications occurred in this period. The quality of EC governance improved, thanks very largely to better implementation and enforcement of the law; the financial sector became freely involved; competition policy was made congruent to the assault on intangible barriers to the internal market; and officials began to conceive of policies for industry, trade, social affairs and competition as a whole. In this sense, the internal market cut off both commercial players and their governments from the frustrating recent past.