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Why France and The Netherlands said “No”

By James Cumes - posted Wednesday, 15 June 2005

The emphatic Dutch “No” may have raised the French “No” to the status of a gathering “people’s revolt”. The fascinating prospect is that it may come to be regarded as the first major popular revolt in the West against the American - or Anglo-Saxon - macroeconomic model.

When Charles de Gaulle vetoed British entry he gave expression to the view that European Union was a French concept in the pursuit of which France should have a dominating role. France wanted to ensure that the union would be an association of sovereign member countries rather than a supranational union in which sovereign nation-states would lose their identity and their individual authority and power. With de Gaulle’s departure, the French agreed to admit Britain and others in 1973 and over the years membership increased from the original 6 to 15.

A crucial objective of the French concept of union had been to neutralise Germany and enlarge French power through its control of a European Union. The objective in relation to Germany was already achieved with “the six”, so every additional member in the union only meant that France’s power within the European communities became diluted. Although French opposition to expanding membership declined, it did not disappear, and the expansion to 25 - and the decision to allow Turkish membership - could be seen as completely diluting French control and authority. It is in light of this that France’s reservations about the continuing expansion of membership and the passing of supranational power to this membership can be understood.


But that does not seem to have been the reason for the French “No” in the recent referendum. The established “political classes” and the media generally supported a “Yes” vote. So we have to probe more deeply for the reasons behind this dramatic rejection of the proposed EU constitution by the French and the Dutch.

The Dutch have been one of the most fervent supporters of the European Union: they were an unqualified advocate of British entry and of expansion of the membership of the union from 6 to 15. So their swing to a “No” was especially surprising. But an examination of the state of their economy and the effect the EU has had on it will reveal the causes for the “No” vote.

Until recently the Dutch model of macroeconomic management combined high levels of employment with high levels of growth. High fixed-capital investment, high productivity and high levels of production for domestic and export purposes were maintained in an environment of low inflation, low interest rates, a welfare system that was among the most sophisticated in the world and even a generous program of assistance to the developing countries.

In recent years, much of this has changed. The Dutch economy has slumped into slow growth and high unemployment partly because of and certainly since Maastricht, the single currency and the advocacy of “reform” towards an American model.

It is important to understand how the changing role of the EU, from a conglomeration of states forming a preferential trading bloc to a supranational power imposing fiscal regulations on its members, led to its rejection by the French and the Dutch.

When the Treaty of Rome came into effect in 1958, and for many years afterwards, the European Economic Community was essentially a grouping of sovereign states with a Common External Tariff (CET), giving generally modest tariffs and quantitative protection to industry, and a Common Agricultural Policy (CAP) to protect national as well as community agriculture. Economic and monetary policy stayed with each of the sovereign states: each had its own budget and its own central bank.


Over the years there was some accretion of power to Brussels and the erosion of power of the national capitals. However, in terms of economic policy, the main activities were in the area of trade policy and the CAP, both of which offered protection to national economies. The CAP provided especially formidable protection for community farmers including price support, subsidies and total prohibition of some farm imports.

With the adoption of the Maastricht Treaty, however, this all changed. The change in name to the European Union and the introduction of the single currency gave practical and formidable effect to this change. Maastricht and the single currency moved economic and monetary policy firmly from the national capitals to Brussels. Institutionally, a European Central Bank (ECB) was set up which took over the authority for monetary policy from the national central banks.

This must be seen in the context that, in the last 3 decades of the 20th century, manipulation of interest rates has become overwhelmingly the main instrument of macroeconomic management whether in the US, Japan, Germany, France, Australia, New Zealand or elsewhere. Hikes or cuts in interest rates have become the principal and the most visible, powerful and immediately effective instrument of macroeconomic management.

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About the Author

James Cumes is a former Australian ambassador and author of America's Suicidal Statecraft: The Self-Destruction of a Superpower (2006).

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