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Germany and the Politics of Europe's Money

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This book shows how successive German Governments have maintained Germany's dominance over the European Union. In 1978, Chancellor Schmidt suggested a European Monetary System whose members would share responsibility: this drew in the leaders of the other EU states. But the German Government then changed the EMS's rules so it was created in March 1979 as a Deutschmark zone.

The Bundesbank dominated the EMS, forcing deflation on its members. They suffered substantial slowdowns in growth and increased unemployment in the 1980s, and levels of investment declined compared to the rest of the industrialised world. Trade between EMS members actually fell, and their inflation rates declined no more than those of non-members. As the Federation of German Trade Unions said, "We have criticised the Bundesbank because it always cares more about monetary stability than general economic policy. We put employment first"; the Bank was "strangling growth in Germany and Europe".

In 1987, the French Government proposed a Franco-German Economic and Financial Council to coordinate economic and monetary policies. Chancellor Kohl at first agreed, but the Bundesbank refused to share power. So Kohl then stripped the proposed Council of any policy-making powers, preserving the Bundesbank's dominance.

In 1988, the French Government put forward a scheme for Economic and Monetary Union. Kohl at first rejected it, in order to win the 1990 election, then embraced it after the election. The scheme's European Central Bank, unaccountable and unelected, was modelled on the Bundesbank, except that it is not obliged to support Government policy. Its only aim is price stability. The President of the ECB promised that "policy will be directed towards the French and German economies ... smaller fry with other needs come second ..." But even in the EMS's dominant economy, unemployment is five million.

By entering EMU, we would hand over control of our economy, irrevocably, to a replica of the Bundesbank, in which our needs would be subordinate. We would lose at once and for ever our sovereignty and democracy.