A year when money was sovereign

BERNARD Connolly, in his Eurosceptical polemic The Rotten Heart of Europe, quotes the words of the late French economist Jacques Rueff - "Currency will be the dynamic of European construction, or it will not happen." - to illustrate his central contention that the currency issue is fundamental to the whole future of Europe.

Mr Connolly's book, one of the more entertaining causes celebres of the year, is the perspective of a Eurocrat (now suspended from his job in the Commission) on what he saw as the Machiavellian management of Europe's money, but it owes a great deal to the paranoid style of one Senator Joe McCarthy.

"It is surely not irrelevant," he warns us. "that for many left-wing, middle class Britons "Europe" exercises a grip on the imagination similar to that of the Soviet Union on the Philby generation in the Cambridge of the 1930s." For Santer read Stalin!

But, as the Chinese say, a stopped clock is right twice a day, and Mr Connolly's thesis on the centrality of currency issues is also strongly held by the architects of the single currency, and, above all, 1995 was their year. In Madrid in December their. child was christened "Euro" and a time-table for its launch was decisively set in train. Its fate, and the consequences of pursuing this rocky path, will be the key preoccupation of the EU in the years ahead.

For most of us, money is simply the means by which we translate the value of our humble work efforts into bread on the table. The single currency will make holidays in France easier.

But money and its integrity is far more than that, as any German will tell you. The 12th century Czech chronicler Cosmas wrote of the depreciation of currency as "worse than the plague, more disastrous than an enemy invasion, than famine or other calamities.."

Money is a repository of national wealth, a measure of national economic well-being. The relationship of currencies is a measure of the relationship between countries. By borrowing it we bring forward the future, by saving, we secure ourselves against the vicissitudes of life. It is as vital to our security as any army, just as important to sovereignty, and, hence, ultimately intensely political.

That is why, as Germany's Chancellor Kohl repeated at Madrid, greater politic union is both a necessary condition and consequence of economic union. It is why the issue is still so potent in Britain, although, in an increasingly interdependent world, the defence of national sovereignty over the currency consists largely in the defence of the dubious right to devalue - a right which the Chancellor, Mr Kenneth Clarke, has repeatedly stressed, is not one a prudent government wants to use.

But the British contributed to an important development of the argument last year with their emphasis on the problem of the relationship between the ins and outs, cohabitation - a matter of enormous concern to Ireland. The irony is that the central problem involved in cohabitation, the danger of competitive devaluations, can also be seen as a special case of the problems engendered by multiple currencies in a single market. To raise the issue is thus to make the case for a single currency.

Out of the currency debate has also emerged a consensus around a new economic orthodoxy. The single currency, so the argument goes, requires convergence, the cutting of debt and deficits, and hence painful adjustment. But there has had to be a significant change in the presentation of the issue during the year as Europe's leaders realised that by posing the question in this way they were putting the cart before the jobs horse and actually building domestic hostility to the EU.

The realisation came somewhat late in the ease of France's President, Mr Jacques Chirac, but the latter has now taken enthusiastically to borrowing (subconsciously, of course) from Margaret Thatcher's "prudent-housekeeper" vocabulary.

In more than one way France's fate has been the other, and related, leitmotif of the year. The May election blighted its EU presidency in the first half of the year, and Mr Chirac's success was deeply unsettling. What was France's attitude to the single currency which could not proceed without her? Whither the Franco-German alliance, the rock on which Europe is built?

Bonn, and the rest of Europe, were bewildered by the unpredictability of this loose cannon, appalled by the nuclear tests and the reneging on the Schengen accord to open Europe's internal borders. And countries like Belgium, Italy and Greece saw the re-emergence of France's tradition of popular uprising with trepidation. This was a road they might well be heading down.

The Union also made determined what some had seen as an unhealthy overpreoccupation with the countries of eastern and central Europe. The latter got an ambiguous accession formula from Madrid.

MORE significantly, however, December also saw, courtesy of a vigorous and successful Spanish presidency, the signature of new major accords with the US

and the Mediterranean. Important, though. more limited, agreements were also signed with the Mercosur countries of Brazil, Argentina, Paraguay and Uruguay, as well as with South Africa. A new Lome agreement was negotiated, and in March the EU sets its relations with Asia on a new footing with a heads of government summit in Bangkok.

Relations with Russia have been largely restored, with the freeze on its association accord lifted. Despite Chechnya, no one wants to antagonise Moscow, whose fears for the enlargement of Nato to eastern Europe are now regarded as a legitimate part of EU consideration.

Less successful was the EU's role in Bosnia, and in no small measure the Union's political impotence there will be a driving force for the 1996 big event - the Intergovernmental Conference on the reform of the Union's structures. The conference, which will open in Turin in March, will continue through the Irish presidency in the latter part of the year, probably concluding in the spring after a likely British election.

It has become clear the leap forward will be more limited than perhaps the Germans had hoped, although the scope of the agenda will provide Ireland's diplomats and Foreign Minister, Mr Spring, who must steer it through, with a formidable challenge.