Single European Act – A common purpose

Europessimism; eurosclerosis; deadlocked summits; deep divisions over how to pay for Europe’s policies; the British prime minister’s lack of enthusiasm for Europe; France’s political class divided over whether to pursue more liberal or social democratic economic policies to restore growth and competitiveness; fears that newly joined members will make it harder for Europe to move forward.

The parallels between the early 1980s and spring 2007 are striking. But in 1986 the then European Community found sufficient political consensus to relaunch Europe, uniting around the goal of creating a single market by 1992. The scale of the challenge in getting an agreement at that time should not be forgotten. Today’s political differences seem almost minor by comparison. France’s then president François Mitterrand and the president of the European Commission Jacques Delors were Socialists who had to negotiate with the strongly free-market UK prime minister Margaret Thatcher at her most combative. After five years of hectoring other EU leaders about Britain’s contribution to the Union’s budget, she won the UK a budget rebate which will be around until at least 2014.

Getting a deal on a drive to create a genuine single market by 1992 was possible thanks to an exceptional confluence of factors. Two years into the first term of new Socialist president François Mitterrand, the government’s old-school socialist policies of massive public spending and nationalisation of industrial companies and banks were evidently failing. In 1981 inflation was running away at nearly 14% and growth was only 0.3%. The French franc came under repeated attack on the financial markets. Delors, as finance minister, oversaw a series of desperate devaluations in an attempt to restore lost competitiveness, reducing the franc’s value against the Deutschmark of around 30%. In 1983, against the fierce resistance of his fellow ministers, including then budget minister Laurent Fabius, Delors convinced Mitterrand of the need for an austerity package which cut public spending and wages alike. The bitter medicine worked, boosting exports and restoring industrial output and investment although the number of jobless remained high, reaching around 10% in 1984. But for Delors the experience vindicated his belief that open markets were a better economic recipe than the siege economy measures some, such as Fabius, had been advocating.

On being appointed Commission president in 1985, Delors was searching for a new theme to relaunch the European Community. It had been languishing pretty much since the 1960s, a prisoner of the need to reach decisions by unanimity and in the shadow of the infamous Luxembourg compromise by which member states were allowed to veto decisions being taken by majority voting if they argued that vital national interests were at stake.

Delors had four options in mind to revitalise the Community: institutional reform, economic and monetary union, security and defence co-operation and internal market liberalisation. Following a whistle-stop tour of capitals, he concluded that it was the single market project which commanded the widest support.

Working with British internal market commissioner Francis Cockfield, Delors outlined a package of nearly 300 measures to liberalise the movement of goods within the single market by removing customs checks and barriers, introducing mutual recognition of technical standards and professional qualifications.

Delors’s achievement was to team the liberalising zeal of Thatcher with institutional reforms (primarily the extension of qualified majority voting) which, he argued, were essential to make the 1992 target for completing the single market possible. In that way, he managed to convince Margaret Thatcher to sign up to what her Eurosceptic acolytes admit was one of the largest transfers of power from a member state to the European Community, through the abolition of national vetoes. Thatcher calculated that the UK would be a net gainer from the change, especially through the liberalisation of banking and insurance services thanks to the strength of British financial firms.

More than 20 years after the Single European Act was agreed, the single market is still not complete. The European Commission launched in February a major review with a new focus on ensuring the market helps equip the Union for the challenges of globalisation. A single market for services, especially financial services, is a long way off and Industry Commissioner Günter Verheugen recently launched a new drive on mutual recognition, although this was an element of the 1986 plan. Despite the gaps in the market’s coverage, they should be set against a backdrop of member states having implemented nearly 99% of all relevant legislation. The single market, even in its imperfect form, remains one of the Union’s major achievements. The Commission estimates that it has increased EU gross domestic product by 2.2% since 1992 and created 2.75 million extra jobs. Nevertheless, the feeling that there is "trop de marché" in the EU has contributed to growing hostility to the Union and its policies, which played a part in the rejection of the EU constitution by French and Dutch voters.

But as the exceptional political consensus of the early 1980s showed, Europe can find ways to emerge from long periods of Eurodepression. The striking unity shown by EU leaders at the March summit on the need to tackle climate change and to give Europe a common energy policy suggests that this may be the new theme which restores the EU’s sense of common purpose and endeavour in the same way as the Single European Act of 1986.

Europessimism; eurosclerosis; deadlocked summits; deep divisions over how to pay for Europe’s policies; the British prime minister’s lack of enthusiasm for Europe; France’s political class divided over whether to pursue more liberal or social democratic economic policies to restore growth and competitiveness; fears that newly joined members will make it harder for Europe to move forward.