PRIME Minister Margaret Thatcher's concession to the monetary unionists at the recent summit of European Community heads of state in Madrid represents an important watershed in the process of European construction. While there has been much ado about European commercial integration scheduled for 1992, no single market is genuinely possible without monetary union. Mrs. Thatcher has taken an about-face after years of ferocious opposition to supranational experimentation. Something profound is astir.
Prime Minister Thatcher's opposition to union is rooted in Britain's political traditions and imperial past. Britain has always been the odd man out of Europe, historically involving itself in continental affairs only to preserve the balance of power.
But Britain is no longer a global power. By its commitment to NATO, moreover, Britain has been actively engaged in European military affairs - a notion that would have made Wellington shudder.
The decline of the United Kingdom's economic and military position has compelled British leaders to improvise new strategies. These have included tighter relations with Europe and the United States. The ``special relationship'' British statesmen forged with America endowed Britain with international leverage it could never have enjoyed alone. Access to US technology made the British nuclear-weapons program possible, and US aid facilitated British victory in the Falklands war.
Now that the US must concentrate much of its political energy on restoring national competitiveness, however, the special relationship has grown less special. Despite a strong ideological affinity between Thatcher's conservatives and the US Republican Party, it is clear that Britain's economic destiny lies on the European continent.
This has only slowly dawned on the British and their European partners. When Great Britain first attempted to join the European Community in 1963, France's Charles de Gaulle vehemently argued that British accession was tantamount to US domination of the fledgling common market. The British were denied entry.
The UK was finally admitted to the European club in 1973, but its enthusiasm for integration has remained highly qualified. Thatcher best expressed this apprehension in a 1987 speech in Bruges where, in announcing her strong opposition to monetary integration, she said, ``To try to suppress nationhood and concentrate power at the center of a European conglomerate would be highly damaging and would jeopardize the objectives we seek to achieve.''
The Euro-elections early this summer, in which Thatcher's Tories suffered a shocking loss to the Labour Party, were a turning point. As long as public support for Britain's place in the European Community was only lukewarm, British politicians had little incentive to move beyond their minimalist interpretation of European unity. But the British electorate has grown impatient with Thatcher's campaign to stonewall European integration. With the Madrid meeting following on the heels of these elections, Thatcher had to engineer a switch. It would be political suicide to stand in sole opposition to a process that seems to have captured the imagination of British voters.
Beyond these political considerations, Thatcher, like her continental colleagues, has lost the capacity to operate autonomously in economic matters. In 1987, the UK exported $18 billion worth of goods to the US, while exports to its EC partners amounted to $60 billion. With such a high stake in the European market, no British leader can resist fully the will of the larger Europe. This recalls Franc,ois Mitterrand's failed attempt to reflate the French economy in 1981 while his European partners were retrenching. The French franc plummeted, the balance of payments went out of kilter, and inflation set in. Even more today, the capacity of European governments to forge economic policy in glorious isolation has become limited.
After years of refusing to enter the European Monetary System - which limits and coordinates European currency fluctuations - Thatcher has now agreed to join. Europe's staunchest Atlanticist and most hesitant Europeanist has clearly, if reluctantly, cast her lot with supranational experimenters led by European Commission president Jacques Delors. Yet Thatcher shows no reluctance to voice concerns about this process, and many of her objections are not unfounded. She has rightly questioned the commission's initial preference to regulate rather than internationalize European capital markets, and on a broader scale, she has forced her colleagues to examine closely the role of national sovereignty in the new European order.
Still, America's European partners are evolving into its European partner. This will have profound implications for how US companies conduct their European operations, how US Treasury officials forge international monetary strategies, and the way in which American diplomats and military officials coordinate security policy within NATO. Thatcher's reversal should silence those arguing that European integration is little more than political illusion.