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132 5 CONFLICTING OPTIONS, JULY 1977–MARCH 1978 What has actually changed? What’s changed essentially is (a) the newly emerged stability-consciousness in Rome, above all things in Paris, and the will. One of the most important preconditions. And another thing (b) has naturally changed, that the American benign neglect, concerning the dollar balance of payments, in the meantime became a malign neglect under Messrs. Carter and Blumenthal. And it was urgently necessary that the Europeans say to the Americans: That’s not going to carry on. —Helmut Schmidt In this chapter I analyze the reappearance of the EMU debate at the very top of the EEC’s political agenda, from the decision of the Commission to prioritize monetary cooperation in mid-1977, until before preparation of the European Council ’s meeting of April 1978 in Copenhagen. I will do so in three steps. I will first examine why and how the Commission decided to prioritize monetary cooperation in the EEC in mid- to late 1977. Second, I will scrutinize events before, during , and after the Brussels European Council in 1977, at which the EEC heads of government had planned to take stock of perspectives on EMU. Finally, I will examine Schmidt’s turnaround—the German chancellor became convinced around January–February 1978 that a new European monetary scheme was needed—and the reelection of the French government in March 1978,which allowed the French president to participate in a new European initiative. The three parts of this chapter will therefore highlight the conditions in which the revival of European monetary cooperation took place, and how and to what extent the failed initiatives, analyzed in the previous chapters, resurfaced on the occasion of this relance. The Multiple Origins of European Monetary Cooperation’s Revival It was certainly not for lack of proposals that progress regarding economic and monetary cooperation in the EEC had stalled since 1974. The summer of 1977 CONFLICTING OPTIONS 133 confirmed this trend, with the proposals of the Belgian government, most importantly the initiatives of the Commission, and the ongoing Franco-German bilateral discussions. And much like their predecessors, they all highlighted in advance some central themes of the EMS negotiations. In this section I analyze these three points in turn. Reinforcing Economic Coordination: The Geens Initiative As had been the case with the French government in 1974 and the Dutch in 1976, the Belgian government clearly intended to give prominence to economic and monetary questions on the occasion of its EEC presidency. This intention was made plain by a number of proposals set out in detail in a memorandum on 23 June 1977, and then more formally on the occasion of the Finance Ministers Council of 18 July 1977 chaired by the Belgian finance minister Gaston Geens.1 Geens announced a rather traditional goal:“I think we are all in agreement on the most important objective. We must reduce in practical terms the differences in economic and monetary conditions between the Member States and at the same time reduce the structural differences between our economies.”2 He asked for a continuation of the Duisenberg Plan—thereby stressing once more the continuity of monetary discussions among the European monetary elite—through reinforcement of the coordination of monetary and budgetary policies. In addition to this, he called for more coordination in other various areas (budget, setting of monetary targets, etc.). He also suggested that Ortoli, commissioner in charge of the economics and finance portfolio, could take part in the meetings of the snake so as to render the exchange rate mechanism more communautaire.3 The Belgian memorandum contained a coherent albeit rather vague list of suggestions . It did tackle most of the interconnected issues linked to economic and monetary affairs, namely, economic and monetary coordination, credit mechanisms , transfer of resources, and fiscal policy. But it did so in a particularly vague fashion, listing mostly self-evident truths.4 No specific statement was made about exchange rate arrangements or the possible extension of the use of the EUA. The most revealing point of the Geens proposals was that,regarding credit mechanisms, they manifested concerns that were similar to those expressed during the EMS negotiations . They first showed that the issue of improving EEC credit mechanisms wasconstantandsharedbymanyEECmemberstates.Fourcadehadalreadytackled the problem in 1974 and 1975. He had proposed an increase of short-term monetary support (STMS) as well as medium-term financial assistance (MTFA). Geens asked for some more specific technical adjustments—essentially the introduction of an element of conditionality...

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