increase in the powers of the Commission or to
support the closer political integration of the EC
members. For her part, Thatcher took the lead in
demanding reform of the CAP, though this made
slow progress. But in 1987 the Single European
Act was ratified by national governments and
finally adopted. The Community also accepted
compromises on the budget on the basis of pro-
posals put forward by Delors, which involved
gradual reductions in the proportion spent on
agriculture. Further cuts were in prospect if pro-
duction of specified agricultural produce exceeded
set ceilings.
As the decade drew to a close, the differences
between Britain and the rest of the Community
once more became accentuated. Britain favoured
the dismantling of barriers to trade and the cre-
ation of a free market, but declined to join the
European Monetary System (EMS), which had
come into force in 1979, and therefore did not
participate in the Exchange Rate Mechanism
(ERM), which was designed to create currency
stability. In September 1988 Delors chaired a
committee of experts to discuss European monet-
ary union. The outcome became known as the
Delors Plan, which the Commission president
submitted to member heads of government in
June 1989. It envisaged the creation of monetary
union with a single currency. This was to be
achieved in three stages. All member states agreed
in June 1989 to participate in stage one, the
drafting of a treaty on monetary union. But
Britain refused to begin the second stage, which
- following signature of the treaty – would lay
down the conditions to be met by member states
that would make possible the attainment of stage
three: monetary union with a single currency in
use throughout the Community.
In opposing the moves towards monetary
union, Margaret Thatcher found herself increas-
ingly isolated not only in Europe but within
her own Cabinet. It was her chancellor of the
exchequer and her foreign secretary who insisted
at the Madrid summit in July 1989 that Britain
should formally accept the whole of the first stage
in principle. Margaret Thatcher continued to
oppose the goal of monetary union as it would
undermine national sovereignty, but in October
1990 she was reluctantly driven to agree to
Britain joining the system of fixed exchange rates
(the ERM). It transpired that John Major, then
chancellor of the exchequer, joined at too high
a mark exchange rate. As Mrs Thatcher’s adviser
Sir Alan Walters had warned, the resultant high
interest rates in Britain deepened the recession
and increased unemployment.
European political and economic union re-
mained a goal for the 1990s, though it seemed
hardly realisable with the members’ economies still
so widely divergent. This became painfully clear
when in September 1992 the Italian lira and the
British pound came to be regarded by the currency
exchanges as overvalued. Speculation against the
two currencies overwhelmed the defences mount-
ed within the ERM and both currencies had to
accept the market’s judgement and leave the ERM.
This meant that in effect they devalued against
the previously fixed rate. It was a healthy reminder
to politicians that in a free financial world their
powers are limited. Nor did the Community
nations manage to speak with a common voice on
all vital issues of foreign and internal affairs. The
realisation that such union might not be attainable
within the agreed timetable was resisted by the
political leaders who favoured it.
Seven smaller but nonetheless prosperous
Western European countries which had not joined
the European Community – Sweden, Norway,
Finland, Iceland, Austria, Switzerland and
Liechtenstein, members of the European Free
Trade Association (EFTA) – negotiated a treaty
with the Community in 1991 to create in 1993 an
enlarged European Economic Area of 380 million
people. In addition, Austria, Sweden, Norway and
Finland hoped to join the Community in January- Switzerland too was expected to join those
in the antechamber until in a referendum in
December 1992 the populace decided by a narrow
majority not to join. Swiss neutrality had tri-
umphed. Negotiations were likely to be com-
pleted before the mid-1990s, each country’s
special problems having been taken into account.
Sweden and Switzerland were reluctant to aban-
don their traditional neutrality. Sweden, after
shedding its socialist policies and government in
1991, embarked on the formation of a market