The ERM was the euro of its day. All the clever people in politics,
journalism, academia, the Foreign Office, and the City of London were
in favor of going in, and only Mrs. Thatcher with her allegedly
stubborn anti-Europeanism stood in theway. It took three years of
pressure before Mrs. Thatcher yielded to this consensus of the great
and good--only a few weeks before she lost office. Even then she
qualified her agreement:

" insisted that we enter the wide band--6 per cent on either side...
I made it very clear to John Major [then chancellor of the
exchequer] that if sterling came under pressure, I was not going to
use massive intervention, either pouring in pounds and cutting
interest rates to keep sterling down or raising interest rates to
damaging levels and using precious reserves to keep sterling up. For
me, willingness to realign within the ERM--as other countries had
done--if circumstances warranted it, was the essential condition for
entry (The Downing Street Years)."

Her chancellor, by then her successor as prime minister, did exactly
what she had warned against when sterling came under pressure in the
ERM in 1992. He poured out billions of dollars in reserves and raised
interest rates to a staggering 15 percent in a vain attempt to keep
the pound in the ERM. When the pound was forced out (to the great
benefit of George Soros among others), the central economic plank of
Majorism was destroyed. For Major had fought the 1992 election on the
argument that adhering to the discipline of the ERM was the key to
Britain's economic recovery, explaining away the deep recession it
inflicted on the British economy with the words: "If it isn't
hurting, it isn't working." When Britain left the ERM and the British
economy promptly outdistanced its continental rivals, this exposed
the post-Thatcher Tories as economic incompetents--and worse, as
arrogant economic incompetents because they failed to apologize for
inflicting unnecessary economic distress on bankrupt firms,
mortgage-holders now holding "negative equity", and the unemployed.
The Tories never recovered from the public humiliations of "Black
Wednesday", and hovered around 30 percent in the polls from then
until this year's election. William Hague, the new Tory leader,
finally recognized political necessity this October and apologized to
the British people for the ERM fiasco in his first Tory conference
speech.

Indeed, Clarke is altogether the victim of bad timing. Since he wrote
his anti-Thatcher philippic, Anthony Seldon's biography of John Major
(checked for accuracy by the former Prime Minister) has been
published. And it deals a final coup de grâce to Clarke's thesis.
"Europe", it seems, did damage the Tories, but in exactly the
opposite sense to Clarke's. For the biography reveals that the
chancellor of the exchequer, Norman Lamont, wanted to leave the ERM
on the morning of "Black Wednesday" when speculators attacked. But he
was overruled by Major, who "bowed to pressure from the Cabinet's
pro-European big beasts, Michael Heseltine, Douglas Hurd and Kenneth
Clarke, to go the extra kilometer for the sake of Europe" and raised
interest rates to 15 percent (London Times, October 9, 1997). That
was the first landslip that led eventually to the Labour
avalanche--and it was the result not of "Euro-rejectionism" but of
Euro-fanaticism.

In short, Clarke's argument is utterly fanciful--so remote from the
truth, in fact, that I wondered who he was and where he came from.
Was he perhaps the Cambridge Tory historian, well known for his
mischievous sense of humor? No, that Jonathan Clark lacks a final
"e." Could he be one of those earnest mid-Western Ph.D.s,
specializing in British political history, who are understandably
confused to discover, late in their theses, that Philip Lloyd-Graeme,
Philip Cunliffe-Lister, Viscount Swinton, and the Earl of Swinton are
one and the same chap? Apparently not--his mistakes are not trivial
ones. Clarke, I am told, is a former British diplomat, late of the
Foreign Office. At once, all becomes clear. As an explainer of what
has gone wrong with the Tories, Britain, and British policy towards
Europe, Clarke is, ahem, flawed. But as an explanation he is almost
too perfect.

Ferdinand Mount:

I don't think one can quarrel with the main argument that drives Jonathan
Clarke's essay. In the later years of her prime ministership, Margaret
Thatcher did change from a severe but practical critic of the European
Union's arrangements, especially but not exclusively as they applied
to Britain, into a crusader against the whole idea, from skepticism
in the proper sense of the word to fear and dislike. She would not, I
think, have admitted to this change, preferring like most politicians
to regard her attitude as one of unwavering consistency, but change
there was. It helped to cost her the leadership of her party. And her
supporters' rancor at her unseating helped to destroy the party at
the polls seven years later.

I agree, too, that it would have been quite possible for her to
continue the same robust critique of the European Union's workings in
general, and of any excessive cost to Britain in particular, without
lurching into such passionate xenophobia and paranoia. Even so, I
think the path trod by her and her successor was bound to be stonier
than Clarke allows for.

John Major had an overall majority of only twenty-one, with forty or
more embittered Europhobes behind him who had nothing much to look
forward to except retirement, and who had no particular compunction
about destroying the party's election chances. Of course, he could
have secured a handsome majority for the Maastricht Bill on Second
Reading at any time. In voting on the principle of the Bill, the
opposition parties would always be on their best behavior. But in
Committee, whatever the timing of the Bill, they would lose no
opportunity to savage and humiliate the government. That is what
oppositions do. The same thing happened to Ted Heath with the
original European Communities Bill in October 1971--a majority of 112
on Second Reading, but tiny majorities as low as 4 in the later
stages. In 1971, that didn't really matter so much; the party was
fresh to office (having been elected in June 1970), the backbench
opponents were ill-organized and had little public support. But in
the 1990s, for a party which had already been in power so long, it
was a poisonous running sore. To neglect the parliamentary
arithmetic, as Clarke does, is to ignore the basic reality of British
political life.

I also think Clarke is insufficiently skeptical about European
Monetary Union in general, and more particularly about its
suitability for Britain. EMU does offer real advantages: convenience
to travelers and traders, removal of exchange-rate risk within the
area and, if well managed, long-term monetary stability with
consequent gains for investment and employment.

But it is far from clear that for Britain to join at the outset would
be any more sensible than to be first in the queue for the new
untested model of a motor car. By staying in the negotiations, Major
did not forfeit the advantage Clarke mentions--of having a say in the
arrangements--but he did leave Britain complete flexibility about
whether or when to join. This stance is widely endorsed in Britain,
mostly not for chauvinistic reasons but because our economy is still
so different from those of our partners: in its responsiveness to
interest rate changes, in our structure of housing finance, in the
proportion of our trade that is done in dollars. These questions
worry almost everyone in the British political world--Blair and Brown
and most City bankers and exporters, especially the smaller ones, no
less than Conservative politicians. Wise observers such as Professor
Walter Eltis, Niall Fitzgerald of Unilever, and Martin Taylor of
Barclays have warned of the dangers of joining when our economies are
not properly in sync. Even if the system does not collapse quite soon
after being set up, as Alan Greenspan is said to fear, it may impose
fierce, politically unacceptable and economically unnecessary costs
on the out-of-step members--of which Britain might well be one. This
would be a silly sort of self-mutilation in a period when the British
economy is relatively more successful than at almost any time since
the war.

If the euro is to be a serious and durable currency, rather than a
short-lived political gesture, there is much to be said for building it
slowly with a membership that is comfortable with the rules and
conditions. What's the hurry?

David Willetts:

Jonathan Clarke's piece reminds me of nothing so much as the
outpourings of those extreme Euroskeptics whom he attacks. There is
the same obsession with Europe and the comforting search for the one
simple, exclusive cause of all our troubles--we are told that if only
Conservatives had got the line on Europe right, everything would have
been fine.

Clarke has one valid point: the Conservative Party is still coming to
terms with the implications of signing the Single European Act in
1985. That was a measure of far greater constitutional significance
than the Maastricht Treaty. Conventional nineteenth-century free
trade simply meant accepting goods from other countries without
tariffs, provided they met our domestic regulatory requirements. The
Single Market goes way beyond that in at least three crucial
respects. First, it does not just cover goods but services, capital,
and labor markets. Second, there is mutual recognition. If a Spanish
car meets the safety standards, it should be sold in Britain with no
further regulatory requirements. An academic qualification from a
university in Bologna or Marseille should be valid throughout the
European Union. Third, the market is to be policed by a
supra-national authority, the European Court of Justice, with the
power to intervene where individual nation-states are not complying
with the terms of the Single Market. That is undoubtedly a
significant move away from the traditional powers and prerogatives of
the nation-state. In the decade since the Single Market was ratified
Conservatives have experienced the same tensions as American
Republicans over NAFTA, but even more acutely.