Mastering Modern World History

by Norman Lowe

  Reunification brought enormous problems for Germany – the cost of modernizing the east and bringing its economy up to western standards placed a big strain on the country. Billions of Deutschmarks were poured in and the process of privatizing state industries was begun. Kohl had promised to revive the east without raising taxes, and to make sure that ‘nobody after unification will be worse off’. Neither of these pledges proved to be possible: there were tax increases and cuts in government spending. The economy stagnated, unemployment rose and the process of revival took much longer than anybody had anticipated. After 16 years the voters at last turned against Kohl; in 1998 the SDP leader Gerhard Schröder became chancellor.

  The economy remained the greatest challenge facing the new chancellor. The government failed to improve the situation significantly, and Schröder was only narrowly reelected in 2002. In the summer of 2003 unemployment reached 4.4 million – 10.6 per cent of the registered workforce. At the end of the year the budget deficit exceeded the 3 per cent ceiling for participation in the euro. France had the same problem. Both states were let off with a warning, but the situation did not bode well. Germany’s finance minister admitted that the target of balancing the budget by 2006 could not be achieved without another ‘economic miracle’.

  In the elections of 2005 the CDU/CSU group won a very narrow victory, but lacking a majority in the Bundestag, had to form a coalition with its ally, the FDP, and the main opposition party, the SPD. Schröder stepped down and Angela Merkel, the CDU leader and a politician from the former East Germany, became the first woman Chancellor. There was an economic upswing in the period 2006–7, unemployment fell, and the resulting increase in tax revenues helped to absorb some of the budget deficit. And then came the great crash of 2008, which soon plunged Germany once again into a deep recession. In the elections of September 2009 the SPD suffered its worst ever performance and was forced to drop out of the coalition. The FDP increased its vote significantly and this enabled Merkel to continue as Chancellor. Observers attributed her popularity to her unpretentious manner, her fairness and her common-sense approach. It was obvious that she could not be held responsible for the economic crisis and she seemed to be the leader most likely to restore stability. In office she had been much more moderate than in opposition, when she had taken a tough right-wing stance, criticizing, among other things, excessive welfare dependence. In fact there seemed little to choose between her and Schröder.

  (c) Italy

  The new Republic of Italy began with a period of prosperity and stable government under de Gasperi (1946–53), but then many of the old problems of the pre-Mussolini era reappeared:with at least seven major parties, ranging from communists on the left to the neo-fascists on the far right, it was impossible for one party to win a majority in parliament. The two main parties were:

  the communists (PCI);

  the Christian Democrats (DC).

  The Christian Democrats were the dominant party of government, but they were constantly dependent on alliances with smaller parties of the centre and left. There was a series of weak coalition governments, which failed to solve the problems of inflation and unemployment. One of the more successful politicians was the socialist Bettino Craxi, who was prime minister from 1983 to 1987; during this time both inflation and unemployment were reduced. But as Italy moved into the 1990s the basic problems were still the same.

  There was a north–south divide: the north, with its modern, competitive industry, was relatively prosperous, while in the south, Calabria, Sicily and Sardinia were backward, with a much lower standard of living and higher unemployment.

  The Mafia was still a powerful force, now heavily involved in drug dealing, and it seemed to be getting stronger in the north. Two judges who had been trying Mafia cases were assassinated (1992), and it seemed as though crime was out of control.

  Politics seemed to be riddled with corruption, with many leading politicians under suspicion. Even highly respected leaders like Craxi were shown to have been involved in corrupt dealings (1993), while another, Giulio Andreotti, seven times prime minister, was arrested and charged with working for the Mafia (1995).

  There was a huge government debt and a weak currency. In September 1992, Italy, along with Britain, was forced to withdraw from the Exchange Rate Mechanism and devalue the lira.

  Politically, the situation changed radically in the early 1990s, with the collapse of communism in eastern Europe. The PCI changed its name to the Democratic Party of the Left (PDS), while the DC broke up. Its main successor was the Popular Party (PPI). The centre-ground shrank and there was an increasing polarization between left and right. As the 1990s progressed, attention focused on several issues: the campaign for electoral reform (several attempts at which failed), concern at the escalating number of illegal immigrants (who, it was alleged, were being smuggled in by Mafia groups) and the drive to get the economy healthy enough to join the euro in 2002.

  May 2001 saw a general election which brought to an end over six years of centre-left governments. Silvio Berlusconi, a media magnate reputed to be the richest man in Italy, was elected prime minister of a right-wing coalition. He promised to deliver, over the next five years, lower taxes, a million new jobs, higher pensions and better amenities. He was a colourful and controversial leader who was soon facing accusations of bribery and various other financial misdemeanours. There seemed to be some doubt as to whether he would be able to complete his term as prime minister, but these were dispelled when his government passed legislation which, in effect, granted him immunity from prosecution while he was in office. With a short interval during which the socialist Romano Prodi was prime minister (2006–8), he survived in office until November 2011. However, things started to go badly wrong soon after he returned to power in 2008. The economy was showing increasing signs of strain – there was hardly any growth at all and there was a huge national debt of €1.5 trillion. As the eurozone crisis deepened, Berlusconi lost his majority in parliament and resigned.

  10.2 THE GROWTH OF UNITY IN WESTERN EUROPE

  (a) Reasons for wanting more unity

  In every country in western Europe there were people who wanted more unity. They had different ideas about exactly what sort of unity would be best: some simply wanted the nations to co-operate more closely; others (known as ‘federalists’) wanted to go the whole hog and have a federal system of government like the one in the USA. The reasons behind this thinking were:

  The best way for Europe to recover from the ravages of war was for all the states to work together and help each other by pooling their resources.

  The individual states were too small and their economies too weak for them to be economically and militarily viable separately in a world now dominated by the superpowers, the USA and the USSR.

  The more the countries of western Europe worked together, the less chance there would be of war breaking out between them again. It was the best way for a speedy reconciliation between France and Germany.

  Joint action would enable western Europe more effectively to resist the spread of communism from the USSR.

  The Germans were especially keen on the idea because they thought it would help them to gain acceptance as a responsible nation more quickly than after the First World War. Then, Germany had been made to wait eight years before being allowed to join the League of Nations.

  The French thought that greater unity would enable them to influence German policies and remove long-standing worries about security.

  Winston Churchill was one of the strongest advocates of a united Europe. In March 1943 he spoke of the need for a Council of Europe, and in a speech in Zurich in 1946 he suggested that France and West Germany should take the lead in setting up ‘a kind of United States of Europe’.

  (b) First steps in co-operation

  The first steps in economic, military and political co-operation were soon taken, though the federalists were bitterly disappointed that a United States of Europe had not materialized by 1950.


  1 The Organization for European Economic Co-operation (OEEC)

  This was set up officially in 1948, and was the first initiative towards economic unity. It began as a response to the American offer of Marshall Aid, when Ernest Bevin, the British Foreign Secretary, took the lead in organizing 16 European nations (see Section 7.2(e)) to draw up a plan for the best use of American aid. This was known as the European Recovery Programme (ERP). The committee of 16 nations became the permanent OEEC. Its first function, successfully achieved over the next four years, was to apportion American aid among its members, after which it went on, again with great success, to encourage trade among its members by reducing restrictions. It was helped by the United Nations General Agreement on Tariffs and Trade (GATT), whose function was to reduce tariffs, and by the European Payments Union (EPU): this encouraged trade by improving the system of payments between member states, so that each state could use its own currency. The OEEC was so successful that trade between its members doubled during the first six years. When the USA and Canada joined in 1961 it became the Organization for Economic Co-operation and Development (OECD). Later, Australia and Japan joined.

  2 The North Atlantic Treaty Organization (NATO)

  NATO was created in 1949 (see Section 7.2(i) for a list of founder members) as a mutual defence system in case of an attack on one of the member states. In most people’s minds, the USSR was the most likely source of any attack. NATO was not just a European organization – it also included the USA and Canada. The Korean War (1950–3) caused the USA to press successfully for the integration of NATO forces under a centralized command; a Supreme Headquarters Allied Powers Europe (SHAPE) was established near Paris, and an American general, Dwight D. Eisenhower, was made Supreme Commander of all NATO forces. Until the end of 1955, NATO seemed to be developing impressively: the forces available for the defence of Western Europe had been increased fourfold, and it was claimed by some that NATO had deterred the USSR from attacking West Germany. However, problems soon arose: the French were not happy about the dominant American role; in 1966 President de Gaulle withdrew France from NATO, so that French forces and French nuclear policy would not be controlled by a foreigner. Compared with the communist Warsaw Pact, NATO was weak: with 60 divisions of troops in 1980, it fell far short of its target of 96 divisions, whereas the Communist bloc could boast 102 divisions and three times as many tanks as NATO.

  3 The Council of Europe

  Set up in 1949, this was the first attempt at some sort of political unity. Its founder members were Britain, Belgium, the Netherlands, Luxembourg, Denmark, France, Eire, Italy, Norway and Sweden. By 1971 all the states of western Europe (except Spain and Portugal) had joined, and so had Turkey, Malta and Cyprus, making 18 members in all. Based at Strasbourg, it consisted of the foreign ministers of the member states, and an Assembly of representatives chosen by the parliaments of the states. It had no powers, however, since several states, including Britain, refused to join any organization which threatened their own sovereignty. It could debate pressing issues and make recommendations, and it achieved useful work sponsoring human rights agreements; but it was a grave disappointment to the federalists.

  10.3 THE EARLY DAYS OF THE EUROPEAN COMMUNITY

  Known in its early years as the European Economic Community (EEC) or the Common Market, the Community was officially set up under the terms of the Treaty of Rome (1957), signed by the six founder members – France, West Germany, Italy, the Netherlands, Belgium and Luxembourg.

  (a) Stages in the evolution of the Community

  1 Benelux

  In 1944 the governments of Belgium, the Netherlands and Luxembourg, meeting in exile in London because their countries were occupied by the Germans, began to plan for when the war was over. They agreed to set up the Benelux Customs Union, in which there would be no tariffs or other customs barriers, so that trade could flow freely. The driving force behind it was Paul-Henri Spaak, the Belgian socialist leader who was prime minister of Belgium from 1947 to 1949; it was put into operation in 1947.

  2 The Treaty of Brussels (1948)

  By this treaty, Britain and France joined the three Benelux countries in pledging ‘military, economic, social and cultural collaboration’. While the military collaboration eventually resulted in NATO, the next step in economic co-operation was the ECSC.

  3 The European Coal and Steel Community (ECSC)

  The ECSC was set up in 1951, and was the brainchild of Robert Schuman, who was France’s Foreign Minister from 1948 to 1953. Like Spaak, he was strongly in favour of international co-operation, and he hoped that involving West Germany would improve relations between France and Germany and at the same time make European industry more efficient. Six countries joined: France, West Germany, Italy, Belgium, the Netherlands and Luxembourg.

  All duties and restrictions on trade in coal, iron and steel between the six were removed, and a High Authority was created to run the community and to organize a joint programme of expansion. However, the British refused to join because they believed it would mean handing over control of their industries to an outside authority. The ECSC was such an outstanding success, even without Britain (steel production rose by almost 50 per cent during the first five years), that the six decided to extend it to include production of all goods.

  4 The EEC

  Again it was Spaak, now foreign minister of Belgium, who was one of the main driving forces. The agreements setting up the full EEC were signed in Rome in 1957 and they came into operation on 1 January 1958. The six countries would gradually remove all customs duties and quotas so that there would be free competition and a common market. Tariffs would be kept against non-members, but even these were reduced. The treaty also mentioned improving living and working conditions, expanding industry, encouraging the development of the world’s backward areas, safeguarding peace and liberty, and working for a closer union of European peoples. Clearly something much wider than just a common market was in the minds of some of the people involved; for example, Jean Monnet, a French economist who was Chairman of the ECSC High Authority, set up an action committee to work for a United States of Europe. Like the ECSC, the EEC was soon off to a flying start; within five years it was the world’s biggest exporter and biggest buyer of raw materials and was second only to the USA in steel production. Once again, however, Britain had decided not to join.

  (b) The machinery of the European Community

  The European Commission was the body which ran the day-to-day work of the Community. Based in Brussels, it was staffed by civil servants and expert economists, who took the important policy decisions. It had strong powers so that it would be able to stand up against possible criticism and opposition from the governments of the six members, though in theory its decisions had to be approved by the Council of Ministers.

  The Council of Ministers consisted of government representatives from each of the member states. Their job was to exchange information about their governments’ economic policies and to try to co-ordinate them and keep them running on similar lines. There was a certain amount of friction between the Council and the Commission: the Commission often seemed reluctant to listen to the advice of the Council, and it kept pouring out masses of new rules and regulations.

  The European Parliament, which met at Strasbourg, consisted of 198 representatives chosen by the parliaments of the member states. They could discuss issues and make recommendations, but had no control over the Commission or the Council. In 1979 a new system of choosing the representatives was introduced. Instead of being nominated by parliaments, they were to be elected directly, by the people of the Community (see Section 10.4(b)).

  The European Court of Justice was set up to deal with any problems that might arise out of the interpretation and operation of the Treaty of Rome. It soon became regarded as the body to which people could appeal if their government was thought to be infringing the rules of the Community.

  Also associated with the EEC was EURATOM, an organiza
tion in which the six nations pooled their efforts towards the development of atomic energy.

  In 1967 the EEC, the ECSC and EURATOM formally merged and, dropping the word ‘economic’, became simply the European Community (EC).

  (c) Britain holds back

  It was ironic that, although Churchill had been one of the strongest supporters of the idea of a unified Europe, when he became prime minister again in 1951, he seemed to have lost any enthusiasm he might have had for Britain’s membership of it. Anthony Eden’s Conservative government (1955–7) decided not to sign the 1957 Treaty of Rome. There were several reasons for the British refusal to join. The main objection was that if they joined the Community they would no longer be in complete control of their economy. The European Commission in Brussels would be able to make vital decisions affecting Britain’s internal economic affairs. Although the governments of the other six states were prepared to make this sacrifice in the interests of greater overall efficiency, the British government was not. There were also fears that British membership would damage their relationship with the British Commonwealth as well as their so-called ‘special relationship’ with the USA, which was not shared by the other states of Europe. Most British politicians were afraid that economic unity would lead to political unity, and the loss of British sovereignty.

  On the other hand, Britain and some of the other European states outside the EEC were worried about being excluded from selling their goods to EEC members because of the high duties on imports from outside the Community. Consequently, in 1959 Britain took the lead in organizing a rival group, the European Free Trade Association (EFTA) (see Map 10.1). Britain, Denmark, Norway, Sweden, Switzerland, Austria and Portugal agreed gradually to abolish tariffs between themselves. Britain was prepared to join an organization like EFTA because there was no question of common economic policies and no Commission to interfere with the internal affairs of states.