De Silguy plays safe prior to UK election

Date: 06/03/1997

CONTROVERSIAL proposals to apply the concept of 'flexibility' to economic policy have been quietly shelved by the

European Commission for fear of causing a political storm.

In February, Economics Commissioner Yves-Thibault de Silguy informed colleagues that his staff were exploring ways to allow an élite group of countries to adopt economic policies which currently need the unanimous support of all EU member states.

Since this news coincided with the run-up to a UK general election campaign dominated by European issues, other Commissioners felt De Silguy was inadvertently fuelling anti-EU passions in London.

The newspapers were full of suggestions that the front runners for economic and monetary union - France, Germany, the Netherlands, Belgium, Luxembourg and Austria - were planning to form their own economic government with tax-raising powers.

At a subsequent meeting with fellow Commissioners - Marcelino Oreja (responsible for the Intergovernmental Conference), Pádraig Flynn (social affairs), Karel van Miert (competition) and Mario Monti (internal market and taxation) - they made their feelings plain.

Monti, in particular, had already expressed his concern. He has only just been given a mandate to form a high-level group of finance ministers' personal representatives to win the support of all member states for long-stalled tax proposals and felt that suggesting unanimity might not be necessary undermined his careful diplomacy.

In fact, De Silguy's paper explores ways in which the euro-bloc could cooperate in conducting economic policy without violating the founding treaties of the Union.

Above all, the paper maintains the central role of the Commission in initiating legislation and safeguarding the internal market.

The report suggests that a small group of member states would be able to coordinate their approach to social security provision. For a single currency area to work optimally, people should be able and willing to cross state borders in search of work and this would require greater portability of unemployment benefits, working credits and pensions.

Similarly, a single market with a common currency may require tighter control of state aids to industries, the paper says.

Companies should be free to locate plants wherever they wish in the euro-bloc and should not have to compete for the most attractive subsidies.

All these issues would be grist to the political mill in the run-up to the UK election, which is now almost certain to be held on 1 May.

The Commission, which has decided not to publish De Silguy's report, will be keeping its head down until then.