Businessmen take up the EMU battle-cry

Date: 18/07/1996

WITH the German public having lost little or none of their emotional reluctance to part with their beloved deutschemark, Germany's political and business establishment has launched a massive campaign to convince millions of ordinary citizens of the virtues of monetary union.

While holiday-makers on charter flights are to be converted by a 71-page booklet from the Bonn finance ministry bearing the confident title and promise Der Euro - stark wie die Mark (The Euro - strong as the Mark), the powerful Federation of German Industry (BDI) has published a similarly enthusiastic information brochure.

The 28-page document titled The Euro - a chance for German industry gives a glowing account of the prospects monetary union will offer both large and small companies in Germany.

In a text closely shadowing German government thinking, the BDI - the influential voice of big business in Germany - depicts EMU as a powerful tool to provide greater fiscal stability, improve competitiveness and trigger a stronger growth dynamic throughout the Union.

Monetary union, the BDI asserts, will remove exchange rate risks and competitive devaluations between participating countries, improve the competitive position of companies too small to be able to afford expensive currency hedging, give Europe a more adequate world reserve currency than the deutschemark and act as a constant instrument of pressure for sound fiscal policies.

According to the federation, the Euro will also help prevent Europe from reverting to “a period of nation-state egoism” and improve the Union's ability to integrate new members from Central and Eastern Europe, a process from which the BDI says German industry will profit more than any other.

The launch of Bonn's Euro information campaign and the publication of the BDI's information brochure are signs of a new intensity in the German establishment's efforts to convince the public that giving up the deutschemark is a necessary price to pay to ensure future peace and prosperity.

While the government is poised to embark on its biggest information blast ever, spending well in excess of 15 million ecu on informing citizens about the advantages of monetary union, German banks and big companies have launched their own campaign involving publications and seminars designed to dispel widespread public fears that replacing the deutschemark with the Euro might lead to a loss of prosperity and stability and open the door to that most dreaded of all economic evils, inflation.

Since its very inception, monetary union has been the brainchild and priority target of the forces which rule Germany. The man and woman on the street, however, has remained sullenly or openly hostile to a process designed to destroy the most potent and effective symbol of western Germany's post-war recovery.

For most east Germans, the introduction of the mark in East Germany in July 1990 was a more powerful symbol of reunification than the actual merging of the two states a few months later, which many saw as a merely administrative act.

The popularity of the deutschemark abroad, and the status its ownership gives travellers in many foreign countries, has also been a source of pride for millions of ordinary Germans hungering after the respect which their national history alone could not give them.

But the wishes of a large majority of the population have always clashed with the consensus of the economic and political establishment, determined to force the EMU project through.

While it is true that some senior officials in powerful institutions such as the Bundesbank, large companies and leading economic think-tanks continue to view monetary union with open distaste or considerable scepticism - fearing a dilution of Germany's stability dogma in European decision-making and political pressure for massive income transfers from the richer to poorer Union regions - the upper hand in the debate has always been held by those who have argued that any alternative to EMU would carry worse risks than the project itself.

An early indication of this came shortly after the signing of the Maastricht Treaty, when the highly-influential chief economists of the 'big three' German banks - Deutsche Bank, Dresdner Bank and Commerzbank - took the unprecedented step of publishing a common declaration which attacked a manifesto written by 60 economics professors who criticised the single currency project as economically unsound.

While the big German banks have consistently been the most vocal supporters of EMU, with Deutsche Bank chief economist Norbert Walter one of the few senior members of Germany's economic establishment to argue openly for a flexible reading of the Maastricht Treaty's convergence criteria, most big business players have long defended a similar position.

In the eyes of many economic commentators, the majority of whom usually religiously repeat the Bundesbank's stability mantra, the hand of pro-EMU advocates was massively strengthened when a sharp appreciation of the mark against currencies such as the Italian lira and the US dollar suddenly revealed how sensitively Germany's export-oriented industry could react to currency exchange rate swings.

The fight against competitive devaluation, for many years the main battle-cry of French industrialists accustomed to openly clamouring for state intervention to defend their interests, suddenly became a major concern of German business leaders.

The latter were used to declaring proudly that the qualitative edge of German goods and post-sales servicing were such that clients would swallow even stiff price increases caused by the currency markets.

But as many large and small German companies have discovered in the last two years, when a sudden loss of export market share left a bloody trail in many balance sheets, increased global competition means that German businesses have as much to fear from wild exchange rate swings as their competitors next door.

Meanwhile, the disastrous consequences of increased world-wide competitive pressure on payrolls has shaken an increasing number of ordinary citizens out of their economic complacency.

Always quicker to fall prey to existential anguish than most of their European neighbours, more and more ordinary Germans have begun to ponder the truth of the government's and big businesses' insistence that the creation of a monetary union of European countries would leave their country better equipped to deal with the uncertain world of global competition than clinging to the deutschemark and its guardian, the Bundesbank.

The readiness of what is almost certainly still a majority of reluctant citizens to be persuaded to part with the deutschemark was further boosted when Bonn received a positive initial response from its European partners to its proposal for a 'stability pact' to ensure budgetary rigour in the single currency zone.

Just the sound of these two words has a wonderful ring in the ears of millions of Germans who place peace and stability above almost any other political consideration after a century which destroyed more fundamental certainties - and more big cities - in Germany than in any other European country west of Russia.

Always a man to display seemingly unshakeable confidence in the face of apparent adversity, Germany's towering Chancellor Helmut Kohl is quick to dismiss fears that the campaign preceding the elections scheduled for late 1998 might unleash a wave of popular resentment against the EMU project and create a democratic pressure strong enough to make the launch of monetary union on 1 January 1999 impossible.

His most powerful argument and perennial vote-winner will be in portraying EMU as the most effective means to cement European integration and preserve the peace in Europe.

The chancellor believes that the spectre of national conflict combined with the prospect of everlasting peace will be a weapon powerful enough to convince a sufficient number of voters that EMU might, after all, hold less of a threat than a promise.