Letters to the editor

Polls and Comment

Library - an archive
of speeches

Economists write

Bibliography of EMU

The Euroland Economy



A  B  C  D  E  F G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W Y Z



The coal-rich German Saarland, governed by the League of Nations after World War I, restored by plebiscite to Germany in 1935 and situated in the French occupied zone after World War II, was finally restored again to Germany in 1959. This was due to Konrad Adenauer's patient negotiation and the pooling of the French and German coal and steel industries in 1952 within the Monnet-inspired European Coal and Steel Community. So ended a bitter dispute which had long poisoned Franco-German relations.

Santer, Jacques (1937-)

Jacques Santer succeeded Jacques Delors as president of the European Commission in 1995, the second Luxembourger to hold this high office. Chosen as a compromise candidate, he proved a weak leader, with conventional integrationist views. In 1999 he was forced to resign, along with the entire Commission, because of his failure to control a culture of irresponsible neglect, leading to waste and corruption.

Schengen acquis

That part of the Schengen Agreement that has passed into Community law and practice.

Schengen Agreement

An accord to abolish border controls, first signed in 1985, and fleshed out in 1990 into a detailed Convention, the Schengen Agreement was an intergovernmental instrument. As such it was not originally part of Community law. The initial signatories were Belgium, France, Germany, Luxembourg and The Netherlands, but by the time the Convention finally came into force in 1995 Italy, Portugal and Spain had signed up, followed by Greece and Austria. Meanwhile, the Nordic Council was negotiating to merge its own passport-free zone with the Schengen area, bringing Norway and Iceland into the Convention alongside Denmark, Finland and Sweden.

The Schengen Agreement had suffered a troubled passage. The UK (with which Ireland has a passport pact) always stood aloof, anxious about terrorism, organised crime and illegal immigration. So many countries failed to ratify the Agreement that deadlines were missed in 1990, 1992 and 1993. France reimposed border controls with Belgium in 1995 to guard against alleged Dutch laxity over drug traffic. Italy, Greece and Austria were long unable to satisfy other member states that they had adequately strengthened their frontier controls. Libertarians and law enforcement agencies, from their differing standpoints, raised questions over asylum, extradition, exchange of personal data, hot pursuit, visa, tax evasion and the policing of external frontiers.

The meshing of the Agreement with the EU's Treaties, to reflect the 'free movement of persons' provisions of the Treaty of Rome, was largely dealt with by the 1997 Treaty of Amsterdam. This brought Schengen within the acquis communautaire through a protocol, from which the UK (again with Ireland) was exempted, under the new 'flexibility' provisions of the Treaty. Confusingly, part of Schengen's subject matter (visa, asylum and immigration) was brought into the EU's first 'pillar', the EC Treaty, while the rest was brought into the third 'pillar', the Justice and Home Affairs section of the Treaty on European Union. This necessitated further protocols to cover the opt-outs of the UK, Ireland and (in part) Denmark.

From 1998 to 2000 a massive influx of refugees, Kurds escaping Turkish or Iraqi oppression, Bosnians and Kosovars fleeing from Serbian troops, others from Eastern Europe and North Africa, led to widespread criticism of the EU's border-free policies. There were fears that illegal immigrants and 'economic refugees' would swamp genuine applicants for asylum, finding soft entry points from which to transit easily to countries with generous welfare systems, such as Germany and the UK. Some 15 years after its inauguration as a liberalising measure, the Schengen acquis was also proving a breeding ground for popular resentment. (See also Asylum.)

Schmidt, Helmut (1918-)

Helmut Schmidt became German chancellor in 1974 as head of a centre-left coalition in which his own party, the Social Democrats, was the senior partner. His friendship with Valéry Giscard d'Estaing (who also became French president in 1974) formed the bedrock of Community policy-making for the remainder of the decade, a period made difficult by the oil crisis after the 1973 Yom Kippur War, which slowed European economies and caused widespread inflation.

The collapse of the dollar during Jimmy Carter's US presidency (1977-81) converted Schmidt to the plan of the Commission's president, Roy Jenkins, to revive EMU. From their deliberations was born the ultimately ill-fated European Monetary System. Gloomy, introspective and formidable, Schmidt was pessimistic about the global political and economic scene. He was nevertheless an enthusiast for the enlargement of the Community, strongly supporting the applications of Greece, Portugal and Spain. Margaret Thatcher's advent in 1979 heralded a prolonged confrontation between the UK and the other member states over the British contribution to the European budget, during which Schmidt managed to remain equally trusted and respected by Jenkins, Giscard and Thatcher. In 1982 he lost power to Helmut Kohl when the Free Democrats switched coalition sides.

Schroder, Gerhard (1944-)

In 1998 Gerhard Schroder succeeded Helmut Kohl to become the first German Social Democrat chancellor since Helmut Schmidt in 1982. Schroder had made himself electable by jettisoning his radical past, born of a deprived provincial childhood, and portraying himself as a friend of business. His 'new middle' (neue Mitte), modelled on Prime Minister Tony Blair's 'third way', was launched on Europe by the two leaders in a fanfare of publicity in 1999. Intended to pave the way for a shift towards free market policies, it did not long survive setbacks in regional elections and the disdain of French Prime Minister Lionel Jospin. Schroder soon reverted to populist policies, confirming the impression of a politician without a guiding star. Early in 2000, however, his fortunes received an unforeseen boost when the opposition CDU was disgraced by revelations of campaign slush funds, a scandal that reached to Kohl himself. Further helped by economic recovery, Schroder swung again, forcing through tax reform, restoring Franco-German relations and licensing Foreign Minister Joschka Frischer to float controversial ideas for advancing European federation.

Schuman, Robert (1886-1963)

Like his friend Alcide de Gasperi, Robert Schuman based his political beliefs on Catholicism, was bicultural (he was educated in Germany but brought up in Lorraine, which was returned from Germany to France in 1919) and is regarded as one of the founding fathers of the EU.

After serving in the German army in World War I, Schuman entered the French parliament, where he remained until the collaborationist Vichy government was formed in 1940. Jailed by the Gestapo, he escaped to join the underground. After the war French governments came and went with bewildering rapidity, but Schuman endured as finance minister, prime minister and finally foreign minister. At the time there were unresolved territorial and industrial problems between France and a Germany which was desperate to be accepted back into the Western community of nations. In 1950, adopting a scheme devised by Jean Monnet, Schuman proposed to place German and French coal and steel production under a common supranational authority. This 'Schuman Plan' was the first step to Franco-German reconciliation and the federation of Europe. So began another Catholic friendship, with Chancellor Konrad Adenauer, and although their ambition for a common European army failed in 1954, both men lived to preside over the culmination of their hopes in the creation of the European Economic Community in 1957. (See also European Coal and Steel Community.)

Schuman Plan

See European Coal and Steel Community.


See Single European Act.

Seat of the EU's institutions

Unseemly squabbles have marked the choice of location for many of the EU's institutions - none more so than for the European Parliament, which meets in Strasbourg and Brussels, with its secretariat in Luxembourg. Of the other institutions, Luxembourg plays host to the European Court of Justice, the European Investment Bank and the Court of Auditors; Frankfurt houses the European Central Bank; Brussels is the seat for the Commission and the Council of Ministers; and other lesser offices or agencies are spread around various cities.


The profits earned by central banks on interest-free liabilities, chiefly banknotes. Countries with hard and readily exchangeable currencies gain significantly from seigniorage, since individual citizens (especially law-breakers) often hold large sums in cash. The advent of the euro in note form in 2002 will reduce Germany's once valuable seigniorage to its share in the profits of the European Central Bank (ECB). The ECB's plan to issue large denomination (6500) notes will be particularly welcome to the vast Eastern European black market.


Detested by farmers for the paperwork it begets, and by free-marketeers for its self-contradictions, set-aside is a Common Agricultural Policy measure, introduced in 1988, for cutting production by compensating farmers for taking part of their land out of cultivation.

The Seven

Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the UK - the seven original members of the European Free Trade Association (EFTA). The Seven was a term used to distinguish EFTA from the six founder members of the European Community.

Single currency

The European single currency is part of the wider EMU project, the central objective of the 1992 Maastricht Treaty. Under the Treaty, the new currency was to be introduced not later than 1999 through irrevocably fixed exchange rates and finally, by 2002, through the replacement of national currencies by the euro. Britain and Denmark negotiated opt-outs: applicant states had to meet certain 'convergence criteria'. The participating countries were chosen and the conversion rates set in the spring of 1998. Since 1 January 1999, the national currencies that are to be abolished represent non-integral subdivisions of the euro. On the same date the former ECU was converted into the euro on a 1-for-1 basis. Between January 1999 and the end of 2001 the euro and national currencies operate in tandem. By January 2002 banknotes and coin will have been issued to the public, contracts must be converted into euros and new contracts must be denominated in euros. By the end of June 2002 the national currencies of participating member states will cease to be legal tender.

The coining of money is in all states the act of sovereign power. William Blackstone, c. 1765

The single currency is managed by the European Central Bank (ECB) in Frankfurt. The Maastricht Treaty stipulates that the Board and Governing Council of the ECB are to be free from interference by elected politicians, with internal price stability as their priority. The UK (although in principle favourable) and Denmark have to date exercised their right to opt out of the single currency. Sweden has no formal opt-out but has declined to participate. Greece has been informed that its application will be rejected for the time being. All the other EU states have adopted the euro, having been accepted, albeit sometimes controversially, as passing the financial qualifying tests. (For an extensive treatment of the political and economic background to the single currency, see EMU. See also Convergence criteria and Optimum currency area.)

Single European Act (SEA)

The SEA of 1986, the first major revision of the 1957 Treaty of Rome, came at a time of dissatisfaction with the EC's institutional arrangements. Having absorbed the UK, Ireland, Denmark and Greece, and being in the process of absorbing Spain and Portugal, the EC had grown too unwieldy to work properly. The single market was bogged down in trivial disagreements. It was a period of radical thinking. In 1984 Altiero Spinelli had wanted to reform the EC from top to bottom, putting the European Parliament at its centre. The Stuttgart Declaration of 1983 had proposed new areas of co-operation leading, like Spinelli's proposals, to a European Union. The SEA, responding to these undercurrents and coinciding with the advent of Jacques Delors as Commission president, fell far short of the hopes of the extreme reformers, but in reality, by extending the scope of qualified majority voting (QMV), setting a deadline of 1992 for the completion of the single market, and strengthening the powers of the Parliament, it gave the EC new momentum, weakening the national right of veto and so reviving the prospects for integration - developments the more surprising, in retrospect, for having occurred not merely under the watchful eye of Prime Minister Margaret Thatcher but with her encouragement. She for her part doubtless wished the EC to concentrate on the task of organising a transparent internal market and accepted that a degree of supranational control was indispensable to that end, little suspecting that the enhanced role of QMV would prove to be the thin end of a giant wedge. It is nonetheless noteworthy that Denmark initially rejected the Treaty as transferring too much authority to the European Parliament, while the Irish High Court ruled that it entailed an amendment to the Irish constitution, requiring a referendum.

The SEA (Acte Unique) was so named because it covered a wide field and its authors were determined that it should go through as one package. Its main provisions concerned the single market. To remove trade barriers, Commissioner Arthur Cockfield had identified some 300 necessary actions, most of which were blocked by the lack of unanimous agreement in the Council of Ministers. By making these actions subject to QMV the Treaty aimed to turn the common market into a reality by the end of 1992. The SEA also made an attempt at addressing the growing 'democratic deficit', giving the European Parliament the right to be consulted twice over certain types of legislation (the co-operation procedure) and to veto accession treaties and Association Agreements (the assent procedure). To ease the pressure on the European Court of Justice a new Court of First Instance was created, and there were a number of lesser measures. In addition, some general concepts, which were to loom larger in the Maastricht Treaty, made their first appearance, such as 'cohesion' (that is, more money for the poorer states and regions) and foreign policy co-operation.

Single market

From the outset, a single, or common, internal European market was the primary stated purpose of the 1957 Treaty of Rome. The promise of its creation had been a virtual condition of Marshall Aid after World War II, and the six signatories of the 1951 European Coal and Steel Community Treaty turned their attention to forming a wider customs union as soon as their dream of a European army ended with the collapse of the European Defence Community in 1954. The arrangements envisaged in the Treaty of Rome were no mere free trade area. They entailed a common external tariff; the abolition of internal customs duties; the removal of distortions to competition; the harmonisation of relevant laws; the adoption of a common agricultural policy; freedom of movement for persons, goods, services and capital; and the creation of various supranational bodies to execute the Treaty's ambitious purpose.

By 1968 the customs union was complete, but during the next 15 years progress on the single market was blocked by all manner of non-tariff barriers. Up to 70 forms were needed by truck drivers crossing EC borders; public contracts were reserved for national companies; product standards and professional qualifications were neither harmonised nor given mutual recognition; service industries were largely confined to their own member state; capital movements were not liberalised; and differential rates of VAT and duty were distorting trade. By an irony of history, it was largely on British initiative that the EC was able to recapture its momentum. Margaret Thatcher supplied much of the political drive, Commissioner Cockfield produced a crucial White Paper, and an Anglo-French report to the European Parliament also had a significant impact. Meanwhile, Jacques Delors was about to take up his first Commission presidency in 1985. The enlargement of the Community had made unanimity increasingly difficult to reach, and in the new mood it was agreed that Lord Cockfield's proposals to remedy the defects of the single market could only be implemented by qualified majority voting in the Council of Ministers. This was duly enacted in the 1986 Single European Act.

Delors and Cockfield threw themselves into the revived single market programme to great effect, producing 282 Directives and Regulations, of which over 90% had been passed by the Council of Ministers and nearly 80% were being implemented in member states by the target date of 31 December 1992. Delors perceived market integration in the context of economic and political integration, characteristically pushing any measure which conduced to his larger vision; as a consequence, the single market concept soon expanded to embrace such ideas as the removal of passport controls, the introduction of a single currency, police co-operation, 'social action' and tax harmonisation, ideas which were to take more concrete shape in the Treaties of Maastricht and Amsterdam. Others, including Thatcher, regarded the single market as a finite end in itself, irritated at the excessively detailed regulation which accompanied it and resistant to the open-ended amplifications which were being attached to it and which raised fundamental issues of national sovereignty.

The specific single market measures (most of which also apply in the European Economic Area) are too numerous to itemise. Many of them go into detail beyond what is needed for the setting of acceptable standards, engendering a sense that the EU is out of touch, especially among consumers and small businesses. Other measures give rise to concern for the opposite reason, that of being too sweeping. The 1997 Amsterdam summit used the single market as a pretext to assert the EU's right to intervene in national tax and social policy, and the premature launch of the euro in 1999 was largely predicated on the theory that a unified market automatically required a unified currency.

It is hard to reach a convincing verdict on the single market. It is certainly arguable that a vigorous programme of mutual recognition of products and standards might have been at least as successful in promoting economic activity as the harmonisation policies that the Commission has pursued. Equally, it is true that the single market remains an uncompleted process - financial services and public procurement are still far from liberalised, compliance levels vary considerably between member states and anti-competitive practices abound. In these areas, the Commission is an advocate of free market philosophy and fair treatment. To Anglo-Saxon eyes, however, there seems to be a bias towards the 'Rhine model' of society, together with a worrying tendency to exploit the qualified majority voting that accompanies single market legislation to undermine the powers of individual countries. Thus the single market, like so much else in the EU, reflects the unfinished debate about the rival merits of an integrated federal Europe or a Europe of independent, if closely linked, member states.

The Six

Belgium, France, Italy, Luxembourg, The Netherlands and West Germany - the six original signatories of the 1951 Treaty of Paris and the 1957 Treaty of Rome, which created the European Coal and Steel Community and the European Economic Community respectively. The Six was a term used to distinguish the Community from the seven founder members of EFTA. Subsequent changes made both numbers obsolete.


For much of its history part of Hungary, Slovakia was amalgamated into Czechoslovakia in 1918, became a Nazi puppet state in World War II, was returned to Czechoslovakia after the war and fell under Soviet domination until the collapse of communism in Eastern Europe in 1989. Freedom brought with it a revival of nationalist sentiment and Slovakia became a separate state in 1993. An ambivalent attitude to reform, continued use of secret police, and other human rights failings initially led the Commission to conclude that Slovakia was not suitable for membership of the EU. With a change of government, however, there were hopes of improvement and the country is now accepted as a candidate, albeit with no prospect of admission for some years.


The most northerly of the former Yugoslav republics, Slovenia has been the object of repeated annexation, division and invasion since the collapse of the Austro-Hungarian empire in World War I. Fears of Serbian domination led to a declaration of independence in 1991 as Yugoslavia broke up. Relatively prosperous by East European standards, Slovenia has a GNP per head not far short of that of the poorest EU member states and has been accepted as a candidate for early admission to the Community, which now accounts for two-thirds of its external trade.

Small countries

Europe's mini-states are for the most part protectorates of, or otherwise closely linked to, larger European countries. These special relationships determine their arrangements with the EU. Applications for full EU membership by small but independent states are complicated by their lack of sufficient resources to play a full part in the Community's governance and by the incongruity of their having equal veto rights with the major nations. Those that enjoy nil or very low tax rates are under persistent attack by member states that believe themselves to be losing revenue as a result of tax avoidance.

  • Andorra, a republican tax haven, over which until 1993 Spain (in the name of a bishop) and France (in the name of its president) held joint sovereignty, has been part of the Community's customs union since 1991, but has not applied for EU membership.
  • The Channel Islands of Jersey and Guernsey are self-governing crown dependencies and together constitute the leading British-linked tax haven in Europe. Although not part of the EU they enjoy free movement of goods under the UK's Treaty of Accession. The Isle of Man has a similar status.
  • Gibraltar falls within the ambit of the Treaty of Rome as a British dependency (ceded by Spain in 1713). A partially self-governing democracy, it is disputed territory between the UK and Spain, a problem exacerbated by its being a peninsula, with its airport on reclaimed land.
  • Liechtenstein, a principality and a tax haven linked to Switzerland, is a member both of EFTA and (unlike Switzerland) of the EEA. It has not applied for EU membership.
  • Malta, a former British dependency and a republic since 1974, has had an Association Agreement since 1970. Its application for membership of the EC in 1990 received only a cautious welcome from the Commission, which was troubled by the country's economic backwardness, its lack of experienced officials, its protectionism and the hostility to the EU of its powerful pro-communist Labour Party. A further problem was its constitutional policy of non-alignment. Nevertheless, Malta is wealthier per head than most other candidate countries and accession negotiations are beginning.
  • Monaco, a principality, a tax haven and a protectorate of France, is in customs union with France but has no formal agreement with the EU.

Other very small European states include the Republic of San Marino, an Italian protectorate in customs union with the EU; and the Vatican City, which is independent.

The Snake

In its first effort at creating a zone of currency stability, the EC attempted in 1971 to fix European parities closer to each other than to the dollar, but with some flexibility (the Snake). The Snake rapidly died with the collapse of the dollar-based Bretton Woods system on which the post-war monetary order had been founded, but was reborn in 1972 as the 'Snake in the tunnel', a system whereby European currencies could fluctuate within a narrow band either side of the dollar. This creature did not last long either, killed off by the currency turmoil that accompanied the 1973 oil crisis. (See also EMU and Werner Report.)

Soames affair

By 1969 President Charles de Gaulle of France had been fighting European integration for a decade. In 1962 the Commission president Walter Hallstein had foiled the French Fouchet Plan for a new model Europe based on co-operation between nation states. De Gaulle vetoed the UK's application to join the Community in 1963 and again in 1967, having in the meantime embarked on a boycott of European institutions and threatened to pull France out of the Community. It was therefore not entirely surprising that de Gaulle now privately discussed with Sir Christopher Soames, the British ambassador, the possibility of France allying with the UK to create a free trade area, incorporating the 'Six' (the members of the Community) as well as the 'Seven' (the EFTA countries). This grouping would be directed by Britain, France, Germany and Italy. The idea (in the rather unlikely event that it could have succeeded) was all that the UK should have hoped for, but, anxious not to offend its prospective partners, Prime Minister Harold Wilson leaked de Gaulle's proposals to Germany and other countries, provoking loud cries of betrayal by the French. Within months de Gaulle had resigned, and the UK was on its way into the Common Market.

Social Chapter

The Social Chapter was originally to be incorporated in the Maastricht Treaty as an expanded and communitised version of the broad social aspirations foreshadowed in the Treaty of Rome. Its detailed provisions were based on the 'Social Charter' (the 'Charter of Fundamental Social Rights of Workers', signed in 1989 by all the member states except the UK) and the subsequent Action Programme of the Commission - a catalogue of social market prescriptions covering health and safety, sexual equality, collective bargaining rights, social security, the 'combating of exclusion' and, most controversially, worker participation in the direction of companies. The Social Chapter's main protagonist was Commission president Jacques Delors, that keen advocate of the 'European model of society' in which social objectives were held to be of equal importance with economic objectives in the framing of Community legislation. His chief opponent was Prime Minister Margaret Thatcher, who believed that over-regulation destroyed jobs and that employment legislation was a matter for national governments, not the EU - ironically, a stance that reflected the intent of the Treaty of Rome more faithfully than Delors' integrationist proposals.

In 1990 John Major succeeded Margaret Thatcher. He soon proved as adamantly opposed as she to the conversion of the non-binding Social Charter into Treaty law. Faced with his obduracy, the other member states finally annexed the Delors text to the Maastricht Treaty as the Protocol on Social Policy, known as the 'Social Chapter'. The fact that the UK was again the only country not to sign constituted the notorious British opt-out. Almost immediately, however, the opt-out became an object of further controversy. In 1993 the Commission's Working Time Directive was passed into law, introduced not under the Social Chapter but as a single market measure, thereby circumventing Britain's hard-won exemption. The Court of Justice upheld the Commission's action. From that judgment there was no right of appeal.

On coming to power in 1997 Tony Blair's Labour government carried out its manifesto pledge to cancel the British opt-out, clearing the way for the incorporation of the Chapter into the main body of the Treaty of Rome by way of amendments in the Treaty of Amsterdam. At the same time Blair promised that the Chapter would not be allowed to undermine competitiveness - a promise that had some foundation in the words of the Treaty, but on which it would be hard to deliver, given the far from free market proclivities of most European governments and the widespread use of qualified majority voting in social legislation.

I cannot think of a single more effective way to create poverty and unemployment in southern Europe. Antonio Martino, former Italian foreign secretary, on the Social Chapter, 1997

Indeed, on the Continent the Chapter has generally been regarded as little more than a codification of social market principles already embodied in national employment law. British industry, however, continues to view it with suspicion, seeing it as a licence to undo the labour market reforms instituted by Thatcher. The story of the Social Chapter epitomises the ideological divide within the Community between the Continental and Anglo-Saxon models of society and economic management. With the defeat of the Conservatives in the UK and the abandonment of the British opt-out it seemed for a while that the Delors vision had prevailed. Blair, however, is no socialist, and even in a period where most governments in Europe are of the left or centre left, global competitive pressures - and the success of the USA - are formidable agents of change and reappraisal. (See also Social Charter.)

Social Charter

Easily confused with the Social Chapter of the Maastricht Treaty or the impotent European Social Charter agreed by the Council of Europe in 1961, the Social Charter (or Charter of Fundamental Social Rights of Workers) was signed in 1989 by all the EU member states except the UK. The Charter was an initiative of Commission president Jacques Delors. Basing his case on the social aspirations contained in the Preamble to the Treaty of Rome, Delors argued that European employment practice should be standardised, with extensive worker protections and, most controversially, labour participation in company direction. These proposals were strongly opposed by Prime Minister Margaret Thatcher on the grounds that over-regulating the labour market would discourage the creation of new jobs and that employment legislation should be a national affair. Moreover, having spent a decade reversing socialism in Britain, she was unwilling to see a Continental version introduced through European legislation.

With the support of the other member states, the Commission planned to incorporate the Social Charter into the Maastricht Treaty. By 1990, John Major had replaced Thatcher, but he was as adamant as she. In the event the Charter's provisions were annexed to the Treaty in the form of a Protocol on Social Policy, informally known as the Social Chapter, from which the UK had an opt-out. The saga ended in 1997, when the new British Labour government terminated the opt-out. (See also Social Chapter.)

'Social dumping'

An expression to describe the superior competitiveness of another country arising from lower labour costs, less job protection or less regulation. The accusation has sometimes been made, especially in Paris and Brussels, against the UK, originally on the grounds of its opt-out from the Social Chapter, more recently (now that the opt-out has been discarded) on the grounds of its flexible labour market conditions. The implication that competitive labour costs and ease of dismissal are discreditable would have some force if, for example, these were a product of disregard of safety standards at work or if they resulted in unfair treatment of redundant workers. But when the advantage is a result of deregulation and low non-wage costs, in an essentially successful and high-employment economy, the charge of 'social dumping' seems often to betray little more than antipathy to the Anglo-American model of free markets.

In the wider context of competition from Asia, Latin America and Eastern Europe, however, where low wages not infrequently coincide with abusive practices and environmental neglect, 'social dumping' raises fundamental, and not easily answered, questions about the merits of unregulated free trade.

Social market economy

A somewhat vague term, originally associated with the legendary German economics minister Ludwig Erhard, to denote a market economy which is nevertheless concerned with social issues. Subsequently the expression came to describe a mixed economy with a high level of state participation. By the 1990s, it was on its way back towards its original meaning - an economy in which the free play of market forces is constrained by regulation and social security features. As a dedicated free marketeer, Erhard was not best pleased to see his phrase taken over by the centre left.

Social partners

Eurospeak for what the British used to call 'the two sides of industry', unions and employers, personified by ETUC (the European Trade Union Confederation) and UNICE (the Union of Industrial and Employers' Confederations of Europe). The Treaty of Rome urges the Commission to 'develop the dialogue between management and labour at European level'.

Social policy

The essence of EU social policy - especially since the Commission presidency (1985-95) of Jacques Delors - has been to give the Community a 'social dimension' through removing control of employment conditions from national governments and harmonising them under Community law. (See also Social Chapter and Social Charter.)

Social protocol

Better known as the Social Chapter.


The European Community's $200 million a year programme for trans-European co-operation in education, targeted at schools and universities. (See also ERASMUS.)


The generation of bored, middle-class, pseudo-Maoist students who in May 1968 sparked mass protests, first in Paris and then throughout Europe, scaring the communist party into disowning them as amateur revolutionaries. These '68ers' gave rise to a false dawn of militant socialism, which led in turn to the free-market counter-revolution of the 1980s and so to their own discreet personal transformation into pillars of green or centre-left 1990s political society.

Solidarity tax

The unpopular tax surcharge introduced after German reunification and earmarked for reconstruction costs in Eastern Germany.

Il sorpasso

The moment in the 1980s when Italy, boosted by its black economy, allegedly overtook the UK to become the world's fifth largest economy (after the USA, Japan, Germany and France). Prime Minister Margaret Thatcher's characteristic response was that in that case Italy's contribution to the EC's budget should be higher. (By 2000 it seemed that the UK had not only resumed fifth position but had, by most measures, overtaken France for fourth.)


Not to be confused with power, sovereignty is to a nation not unlike what free will is to an individual. It is the legal right to take independent action, however constrained by external circumstances.

When signing a Treaty of Accession, a member state, in addition to agreeing to co-operate with other members in various policy areas, also accepts in full the acquis communautaire. This entails granting supremacy to Community law and delegating certain authorities in perpetuity to EU institutions - for example, the right to manage the currency, to set the agricultural régime and to negotiate trade treaties. This delegation of powers does not ultimately affect sovereignty as long as it is reversible without breaking the law. On that analysis, the member states of the EU still retain their sovereignty, provided that they can in the last resort secede legally. For example, in the case of the UK the primacy of Community law derives from Parliament's European Communities Act, which Parliament itself has the power to repeal. Such a repeal would entail abrogating the UK's Treaty of Accession. This would be a severe diplomatic obstacle, but it would not be unconstitutional. Thus it would not be equivalent to the secession of, say, California from the USA.

That night gave us the final proof that a Europe of sovereign states was incapable ... of reaching the sensible decisions that were needed for the common good. Jean Monnet on a squabble over the location of the EC's institutions.

Those who compare NATO obligations to EU obligations, or - more extremely - cite the North Atlantic Treaty as tantamount to a sharing of sovereignty, are mistaken. Countries can (and do) freely withdraw from NATO if they choose to do so. Indeed, the capacity to enter into or to annul such treaties is part of the definition of sovereignty in international law. The notion that the force of global markets makes independence a fiction is another fallacy. The essence of self-government is not that it confers omnipotence but that it allows a country to choose its response to events. Canada's independence from the USA, Switzerland's from the EU, and Japan's and Singapore's from the rest of the world prove that neither size nor geography are relevant. A city state and an economic giant may be similarly affected by shocks in financial markets, yet each can determine freely whether to react by, for example, floating or refixing its currency, protecting or deregulating its banking sector. Such decisions represent the practical exercise of sovereignty.

The encroachment of Community law and the growing scope of the powers ceded to European supranational institutions have combined to make sovereignty an explosive issue of principle to those who set store by national self-determination. It is no reply to speak vaguely of 'pooled sovereignty' - a meaningless expression in vogue among diplomats - or to suggest that a share in EU decision-making provides 'effective sovereignty'; such a line of reasoning would equate a province to a self-governing nation. Whether sovereignty resides in the people (as in the USA) or in the institutions of constitutional government is a matter for debate and doubtless varies from country to country. Either way, it is married in the nation state to democratic legitimacy. In the European context the blurring of the concept is part of a wider process of disparaging the nation state in favour of an undemocratic and as yet amorphous federation, itself intended by its creators to evolve ultimately into a new country, with all the attributes of sovereignty which they rebuke as obsolete or chauvinist in individual nations. (See also 'Democratic deficit' and Federalism.)

Spaak, Paul-Henri (1899-1972)

Probably Belgium's most eminent statesman of the century, Paul-Henri Spaak both typified and substantially advanced his country's federalist approach to European affairs. A neutralist before 1940, he spent most of the war in the UK. After the war he participated actively in every significant initiative towards European integration - the creation of Benelux, the Congress of Europe, the European Movement, the Council of Europe (from which he resigned in 1951, finding it ineffective), the formation of the European Coal and Steel Community, the failed attempt at a European Defence Community, and finally the signing of the Treaty of Rome, for which a committee under his chairmanship produced the blueprint. From 1957 to 1961 he was secretary-general of NATO. Returning to Belgian politics as foreign minister, he crossed swords repeatedly with President Charles de Gaulle, notably over de Gaulle's veto of Britain's membership of the EEC in 1963 and the subsequent French boycotting of Community institutions.


A century which started bleakly for Spain with defeat by the US in 1898 and the loss of many of its overseas territories, and which continued with a traumatic civil war in the 1930s, ended in confident prosperity. Treated as a pariah after World War II, Spain was not admitted to the UN until 1955. In 1962 it applied to join the EC, but was rejected on the grounds of General Franco's dictatorship. Franco's death in 1975 opened the way for constitutional monarchy, democracy and a renewed application. In 1986, after an arduous negotiation, Spain was admitted to the Community, at the same time as its neighbour Portugal. It had also joined NATO in 1982, but its commitment was half-hearted and in 1986, following a bitterly fought referendum, it withdrew from the integrated military structure, rejoining only in 1998.

The country's regions play a strong role in its affairs, especially in the Basque country (where there is an active terrorist separatist movement, the ETA) and in Catalonia. This phenomenon raises some doubts about Spain's integrity as a nation state and makes it a natural supporter of the EU's Committee of the Regions. As one of the Community's poorest countries, it is a substantial beneficiary of aid from the structural funds.

Although the peseta devalued during the 1992 ERM crisis, Spain was accepted in 1998 as a first-wave participant in the single currency, having achieved a considerable degree of fiscal discipline and having moved rapidly to privatise the state-owned industrial structure created by Franco. This feat, together with the successful hosting of the Olympic Games in 1992, symbolised the country's progress in shaking off the consequences of the past, and the final demise of the peseta in 2002 will go unlamented.

In 2000 the Popular Party of José-Maria Aznar was returned to power with an absolute majority, reflecting the voters' revulsion from the corruption of the Socialist administration that had preceded him. The need for leftist 'anti-fascist credentials' was a thing of the past. Aznar's free-market policies had brought economic success and Spain, as the EU's fifth largest state, had matured into a leader, together with Britain, of the drive for economic liberalism within the Community. Aznar owed his electoral victory in part, too, to his uncompromising stand over terrorism. No longer dependent on coalition with moderate separatists, he reasserted his faith in a unitary Spain.

All in all, then, Spain's experience of the EU has been favourable. The country has shed political extremism and gained prosperity. In turn, it has contributed to the Community a new orientation towards Latin America and the Mediterranean states of North Africa. If there are problems on the horizon, other than some disputes with Britain over Gibraltar and the Common Fisheries Policy, these relate chiefly to the fear of losing EU subsidies with the admission to the Community of the impoverished ex-communist countries of Eastern Europe.

Spinelli, Altiero (1907-86)

An Italian journalist, a romantic communist and an opponent of Mussolini's fascism, Altiero Spinelli spent ten pre-war years in prison and his World War II years in internment, exiled to an island, where he wrote a federalist manifesto. Anti-Church, anti-American, anti-British, anti-nationalist, anti-capitalist, he saw the war as creating the revolutionary conditions through which popular socialism could flow like 'molten lava'. Spinelli joined the Commission in 1970. In 1979 he became one of the first directly elected MEPs as part of the communist group. His major work as an MEP was the 1984 Draft Treaty establishing the European Union, which reflected his view of the European Parliament as a potential constitution-making body (or 'constituent assembly'), able to enact a new constitutional Treaty if ratified by a majority of the large member states. Since this role was reserved under the Treaty of Rome for unanimous agreement among the member states, Spinelli's Treaty eventually fizzled out, although it paved the way for the Single European Act of 1986 and in some ways anticipated the Maastricht Treaty of 1992. (See also Crocodile Club.)

Sport (1)

In the late 1990s Competition Commissioner Karel Van Miert began to target sport, starting with Formula One motor racing and Association Football. At issue were fundamental questions. Is sport a business, subject to Community laws on restraint of trade, or a voluntary activity like a club? And if professional sport is a business, does that interpretation extend to its regulation and to those many areas where the dividing line between amateurs and professionals is blurred?

In 1995 Van Miert had won an important legal victory, assuring professional footballers of freedom to play without restriction for clubs throughout the EU. In 1998 he signalled his intention to challenge, as an abuse of dominant position, the monopoly enjoyed by the FIA, the Formula One ruling body - a monopoly which enabled it to decide track venues for races and to command vast television fees. At the same time, Van Miert offered a not dissimilar challenge to football's governing authority, UEFA. Against him, it was argued that sports without firm central direction easily decline into lax standards. With large sums at stake, the stage was set for complex legal battles before the European Court of Justice.

Sport (2)

Recognising the hold of sport on popular affections, the Commission seeks to identify the EU with sporting events. A vintage year was 1992, in which the Community sponsored the Tour de France and took advantage of the coincidence that both the Winter and the Summer Olympics were taking place in Europe. A naive attempt to have member states' athletes compete in a unified EU team at Barcelona was vetoed by the European Olympic Committee, but the Community, despite the Olympic Charter's ban on political propaganda, spent over $15 million on advertising during the opening ceremonies. The result was a spectacular show in which the darkened stadium was transformed into the 12-star European flag by spectators waving blue and yellow torches. Other sports which the Community sponsors include yachting (the Treaty of Rome has twice participated in round-the-world races), tennis (the European Community Championship for indoor tennis has been supported financially by the Commission since 1986) and swimming. In 1991 the European Sports Forum was set up, a body which brings together government and EU officials, together with various national sports federations, to advise the newly created sports sector of the Commission's tenth ('Information') Directorate-General - doubtless a welcome development to those who believe in the image-building opportunities of state-sponsored sport. Ironically, the only sport that arouses spontaneous pro-European sentiments is golf, whose biennial Ryder Cup contest against the USA is entirely free from Community involvement.

Stability and Growth Pact

The Stability and Growth Pact (originally the 'Stability Pact') is the outcome of Germany's determination to ensure that the euro would be permanently underpinned by sound government finances. During the negotiations over the selection of participants for the single currency, Germany feared that some member states (especially the southern Mediterranean ones) might meet the Maastricht Treaty's 'convergence criteria' on the set date but might relapse into fiscal indiscipline after they had been granted entry. The Treaty already contained long-term provisions to prevent 'excessive deficits'. Germany wished to stiffen these and incorporate them into a Stability Pact. Europe, however, was in recession and France was anxious to water down the Pact so as not to exacerbate an already alarming unemployment crisis. As a face-saving compromise, it was agreed by the European Council at Amsterdam in 1997 that a resolution calling for employment-friendly policies should be issued simultaneously, but the substance of the Pact - to be known now as the 'Stability and Growth Pact' - survived unchanged.

The agreement requires member states to submit medium-term 'stability programmes' to the Council and the Commission. Countries not participating in the single currency are bound only by the Treaty obligation to 'endeavour' to avoid excessive deficits. But within the eurozone the penalties for financial transgression are severe. If a participating state's budget deficit exceeds 3% of GDP, it must lodge a non-interest-bearing deposit with the Commission on a sliding scale up to a maximum of 0.5% of GDP. The deposit is forfeit if the deficit is not rectified within two years. If a country's debt exceeds 60% of GDP, it is liable to a fixed penalty of 2% of GDP. In both cases, there are escape clauses: the penalties would normally be waived for a state undergoing a serious recession (defined as a 2% drop in GDP) or making 'significant progress' towards correcting an excess - the latter concession being crucial for Italy and Belgium, which both have government debt considerably in excess of 100% of GDP. In 1999, the eurozone countries agreed voluntarily to reduce their target deficit to 2%, although an exception had again to be made for Italy, which was forecasting a 2.4% deficit.

The size of the potential penalties, which have to be approved by a two-thirds majority of the eurozone countries, gives rise to doubt whether they would ever in practice be levied. For example, if Italy were to be deemed in breach of both its limits, it could face fines of over $20 billion.

Stability Council

See Euro-X and Stability and Growth Pact.


The EU's work experience scheme offering graduates the opportunity of an internship in the Commission. Poorly paid, stagiaires console themselves with the knowledge that the stage is an unrivalled means of making contacts and often leads to a permanent job in one of the Community's institutions.

Strauss-Kahn, Dominique (1949-)

As minister for economics, finance and industry in Prime Minister Lionel Jospin's government, Dominique Strauss-Kahn was widely credited with responsibility for France's economic recovery as he steered a many-hued coalition of Socialists, Communists and Greens towards pragmatic business-friendly policies. In 1998 he had successfully advocated the admission of Italy and Spain to the euro. Popular even with his opponents, he was nevertheless forced out of office in 1999 over an apparently minor alleged financial impropriety, thereby setting a rare precedent in French politics for principled resignation.

Stresa Conference

The Stresa Conference of 1958 effectively launched the Common Agricultural Policy, six months after the Treaty of Rome came into operation. Dominated by Sicco Mansholt, the Conference decided on a system of guaranteed prices rather than direct income support to farmers.

Structural funds

The collective name given to four (or perhaps more properly five) funds set up to assist underdeveloped, declining or economically stagnant regions of the EU.

The European Regional Development Fund (ERDF), created in 1975 and accounting for about half the EU's structural budget, targets underdeveloped regions and areas suffering from industrial decline. The ERDF meets part of the costs of each programme, the balance being provided by the relevant member state, and gives priority to schemes which contribute to Union policy aims. Over the years, the main beneficiaries have been Spain, Portugal, Greece, Ireland and Italy. The UK, which was largely responsible for initiating the ERDF as a counterweight to the subsidy bias in favour of more agricultural countries inherent in the Common Agricultural Policy (CAP), has proved to be a relatively unsuccessful applicant. Ireland, by contrast, despite its sharp rise up the EU's league table of comparative wealth, has remained a magnet for funds.

The European Social Fund (ESF), created under the original Treaty of Rome, is designed to combat long-term and youth unemployment through vocational training and retraining, again complementing subsidies made by member states. The ESF accounts for about a quarter of the structural budget and overlaps to a considerable extent with the ERDF, in that around half its appropriations are aimed at the same objectives.

The European Agricultural Guidance and Guarantee Fund (FEOGA) is confusingly split into two parts. The (larger) Guarantee section is a central feature of the CAP and is deployed on price support. The Guidance section counts as a structural fund and is designed to assist rural restructuring and non-farm development, as well as subsidising depressed areas and those with special problems, including mountainous and Arctic regions. Like the ESF, it overlaps with the ERDF, spending about half its allocation on similar programmes. The fourth structural fund, the Fisheries Guidance Instrument, is much smaller and focuses on assistance to the fishing industry.

The Cohesion Fund was created by the 1992 Maastricht Treaty with the aim of accelerating economic convergence in the run-up to EMU. At the time the Commission wanted to double the amount of aid spent on the four least prosperous states, Spain, Portugal, Ireland and Greece. The Cohesion Fund targets infrastructure, with particular reference to the environment and to transport, energy and telecommunications, and is included in the EU budget under the same rubric as the four older funds.

From small beginnings, the structural funds had grown by 2000 to some 35% of the EU budget, with between a half and two-thirds of their disbursements going to underdeveloped regions. The ingenuity and determination shown by certain member states in applying for grants meant that there was no close correlation between subsidy and need - not, at least, as measured by national wealth. From a broader perspective, despite a remarkable percentage increase in the amount of the funds, they remained insignificant for all but a few of the recipients. In total they accounted for about 0.4% of EU-wide GDP, enough to weigh heavily with Ireland, Greece and Portugal, as well as to attract extensive fraud, but not enough to achieve the redistributive or economic adjustment effects advocated by the 1977 MacDougall Report.

The forthcoming enlargement of the EU raises the question of the future distribution of the available funds. The favoured candidates for early membership are markedly poorer than the poorest current member states and equally populous (Poland has about the same population as Spain, while the Czech Republic and Hungary have about the same as Greece and Portugal). In 1985 Greece had threatened to veto the accession of Spain and Portugal at the last minute unless it received additional subsidies. This resulted in the Integrated Mediterranean Programmes (IMPs), of which the beneficiaries were Greece and the most backward regions of southern France and Italy (the IMPs were discontinued in 1992 and effectively replaced by the Cohesion Fund). The next round of enlargement is likely to give rise to even more complex and acrimonious brinkmanship. The Commission's plan to reduce from 50% to 35-40% the proportion of the EU's population classed as living in areas which qualify for assistance is already contentious enough. Germany, the UK, Sweden and The Netherlands will not wish to increase their net contributions. Spain, Ireland, Portugal and Greece will be equally determined not to suffer a reduction in their receipts. France and Italy will be unwilling to step into the breach. Despite much talk about the necessity of reform, the impasse will not be easily resolved.

Differences over the allocation and financing of the structural funds may also lead to more fundamental questions. Support for declining industries, although it can help to mitigate social disruption, is ultimately anti-competitive. As long as the EU's structural funds are confined to easing transition, this problem is containable. But longer-term payments from one set of countries to another will need greater political consensus than presently exists. Modern economies are helped to adjust flexibly to change through automatic counter-cyclical fiscal stabilisers, as prospering sectors pay more tax while struggling regions receive more benefits. The rigid EU system represents an entirely different concept. The advent of EMU may well cause dislocation, the more serious because of Europe's low labour mobility. In that case the need for a review of the nature and scale of EU transfer payments will become irresistible if the Union is to escape a dependency culture in depressed regions combined with a politically contentious misdirection of taxpayers' money from the wealthiest countries.

Structural policy

Eurospeak for policies aimed at reducing economic disparities between prosperous and poor regions. (See also Structural funds.)

Structured dialogue

Regular pre-accession discussions with countries that are candidates for membership of the EU. (See also Enlargement.)

Stuttgart Declaration

Now almost forgotten, like the Genscher-Colombo Plan which preceded and prompted it, the Stuttgart Declaration of 1983 was made by the European Council and presaged the transformation of the Community into the European Union. It began the process of curtailing the national right of veto, increasing the powers of the European Parliament and advancing the single market, as well as urging greater co-operation in the political, economic, industrial and security fields. More than a decade after President Charles de Gaulle's retirement it signalled France's conversion to the cause of federalism. Intent on her budget negotiations over the British rebate, Prime Minister Margaret Thatcher accepted the Declaration, properly known as the Solemn Declaration on European Union, perhaps underestimating the encroachment on national sovereignty that it threatened. The Declaration led to the Dooge Committee on institutional reform and the Adonnino Committee on a People's Europe, both of which made proposals which were to find expression in the Single European Act of 1986 and the Maastricht Treaty of 1992.


The term subsidiarity conveys the impression of a principle that decisions should always be taken at the national level, 'close to the citizen', unless for compelling reasons they have to be taken at the EU level. As such it was relied upon by the British government to reconcile the electorate to the federalising implications of the 1992 Maastricht Treaty. There were, however, two flaws: subsidiarity is too vague a principle to be relied upon in law; and its meaning is not necessarily what it purports to be, for the term begs the question who determines - and on what criteria - the level at which a decision should be made.

The 'principe de subsidiarité' first surfaced in a Commission paper submitted to a report on institutional reform in 1975, a time when Community confidence was at a low ebb. Starting from the point that the European project 'is not to give birth to a centralising superstate', the Commission proposed that the Union should be 'given responsibility only for those matters which the member states are no longer capable of dealing with efficiently'. This sounded reassuring, but the Commission qualified its proposal by adding that the potential application of the principle was 'of course' restricted, since 'the Union must be given extensive enough competence for its cohesion to be ensured'.

As the momentum of integration grew, the concept of subsidiarity was diluted. Without using the actual word, the 1986 Single European Act sanctioned Community action (in this case, on the environment) to the extent that its objectives 'can be attained better at the Community level'. The Maastricht Treaty stipulated that the subsidiarity principle did not apply at all to areas within the Community's 'exclusive competence': and in other areas the EU could take action whenever its purposes could not be 'sufficiently' achieved at national level. The presumption, implicit in the Commission's 1975 paper, that responsibility lay with the member states unless delegated of necessity to the Union had now effectively been reversed. Henceforth, responsibility lay with the Union unless it considered the issue in question parochial enough to be entrusted to lower authority. Commission president Jacques Delors made his own position clear when he suggested animal welfare as a suitable subject for the member states - to him, subsidiarity was no more than a sop to British public opinion.

British negotiators were well aware that subsidiarity ... equalled federation, and were content that it be so, provided the sceptics back home did not hear about it. Dr Jürgen Oesterholt, German ambassador to Britain, June 1996

The Danish referendum's rejection of the Maastricht Treaty in 1992 led to a protestation by the European Council that subsidiarity was a genuine principle and 'excessive centralisation' was not Europe's intention. But the acid test would be the attitude of the Court of Justice. In 1996 (in a case on employment conditions) the advocate-general opined that it would be 'illusory' to expect member states to achieve harmonisation better than the Community - an interpretation that ruled out the application of subsidiarity across a broad range of policies, including the single market. With its history of integrationism, based on the Treaty of Rome's doctrine of 'ever closer union', it was in any event certain that the Court of Justice, failing a strong political steer in the opposite direction, would interpret any ambiguity in favour of supranationalism.

A protocol to the 1997 Treaty of Amsterdam codified the guiding principles of subsidiarity. Again, there was lip service to national decision-making, but the central message was uncompromisingly supranational. The acquis communautaire and the 'institutional balance' (the respective responsibilities of the member states and the EU's institutions) were to be 'maintained in full'; the supremacy of Community law was to be sacrosanct; the Community's powers were not to be 'called into question'. The phrasing was revealing. This was a repudiation of the British and Danish vision of subsidiarity. A concept that had once been portrayed as proof that the high water mark of federalism had been reached was now reduced to guidelines as to the most user-friendly form of Community action - 'other things being equal, Directives should be preferred to Regulations and Framework Directives to detailed measures'. For integrationists, it was victory. For their opponents, especially for wishful thinking politicians who had convinced themselves (or the voters) that subsidiarity would swing the balance of decision-making back towards the nation state, it was the end of a delusion.


The 1997 Treaty of Amsterdam introduced the provision that a member state found guilty of serious and persistent breach of fundamental principles of liberty could forfeit its Treaty rights, while still being held to all its obligations. The judge and jury would be the European Council. Doubtless the purpose was to reserve the power to suspend a member state (perhaps an ex-communist Eastern European country) that was accepted into the EU but subsequently relapsed into authoritarianism. There were, however, overtones of authoritarianism in the provision itself.

In similar vein, the European Parliament proposed in 2000 that transnational political parties which 'do not respect fundamental rights' should be open to suspension. But in the eyes of a federalising zealot it might be a short step from Euroscepticism to 'xenophobia' and suspension.


Sweden was a founder member of the Council of Europe, EFTA and the Nordic Council, but its policies of non-alignment and neutrality, which had kept it out of both world wars, were long an impediment to joining the EC. In 1991, as the collapse of Soviet communism ended the Cold War and the single market gained momentum, Sweden applied for membership and acceded in 1995 to what had by now become the European Union. Disillusionment, however, soon set in, especially on the left, and the 52% referendum vote in favour of ratification in 1994 would probably have been reversed if the vote had been retaken a few years later in the light of experience.

Once very prosperous, based on its rich natural resources and its sophisticated engineering industries, Sweden was governed by Social Democrats for all but seven years from 1932 to 1991, developing the so-called 'Swedish model of society', with a strong emphasis on social security and the maintenance of a high moral tone. Heavy taxes, sluggish growth and an eventually unsustainable level of public debt led, however, to a relative decline in prosperity (to about the average EU level) and an urgent need for reform. The centre-right administration elected in 1991 embarked on a programme of economic liberalisation and draconian welfare cuts, at a painful short-term cost in unemployment. Spending restraints continued under the Social Democrats when they returned to power in 1994, but the economy had been restored to an even keel and unemployment fell substantially. By 1998, had the country been so minded, it could readily have been admitted to the European single currency.

The country has a strong sense of the value of democratic self-determination and retains its traditional concerns for the environment and for typically modern social causes. It resents the secrecy and corruption scandals surrounding the EU's institutions and has little confidence in the benefits of Community harmonisation. As recently as 1995 no less than half of its 22 MEPs were from anti-European parties. Sweden did not join the ERM and in 1997 decided not to participate in the euro. The country's attitude to the EU is, however, characterised by ambivalence as well as aloofness, and by 2000 the single currency issue was again on the agenda, with business in favour and the left, as before, leading the opposition.


Switzerland has its own ways of doing things. Known for its banking secrecy, its neutrality, its unique confederate system of cantonal government, its attachment to direct democracy and its reluctance to join supranational bodies (it is still not a member of the UN and only joined the Council of Europe in 1963 and the World Bank and the IMF in 1992), Switzerland has long stood aloof from the EC. It was, however, a founder member of EFTA and in 1992, as the single market gained momentum and Austria, Sweden, Finland and Norway opened negotiations to join the EU (as the EC was now becoming), Switzerland also applied, simultaneously signing the EEA treaty which would link EFTA to the Union.

At this point, the traditional Swiss sense of separate identity reasserted itself and at the end of 1992 just over half the electorate and some three-quarters of the cantons rejected the EEA by referendum, thereby effectively shelving Switzerland's application for membership of the EU. The country has a host of bilateral economic arrangements with the Community, but its determination to protect its own interests was evidenced in 1994 when it voted to ban EU trucks from using Alpine roads. Nevertheless, in 1999 Ruth Dreifuss, the president by rotation, announced a renewed desire by the government to join the EU. This would require a double majority (of the cantons and the voters) in a referendum - no easy feat, given the Euroscepticism of the German-speaking Swiss, who account for nearly two-thirds of the population and an even higher proportion (19 out of 26) of the cantons. In the parliamentary elections of October 1999 the once neglected Swiss People's Party, running on a nationalist platform, emerged with a vastly increased share of the vote. Business, too, showed itself cooler, and more divided, on the merits of the EU than had been supposed. Thus despite the support of the French-speaking 20% of the population, the government seemed unlikely to realise its wishes.

Switzerland's antipathy to centralised power is reflected in its constitution, which recognises four official languages and vests sovereignty in the cantons except in areas specifically entrusted to the federal government. Europeanists fantasise that the country's accession to the EU would enable it to 'teach Europe lessons' about the defence of cultural diversity. But in reality the Swiss devolved model is the antithesis of the integrationist system of the Community. Nor has the economy suffered from the country's independence. The Swiss franc has for many years been the strongest currency in Europe and Switzerland shares with Norway, that other notable non-member of the EU, the distinction of being the most prosperous major country on the Continent.

Return to top