Europe finds its 'Community' pocket is empty
The European Community is broke. And, so far, its political leaders are showing few signs of taking the drastic steps that are needed to shore up the 10 -nation group's crumbling finances.Skip to next paragraph
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The announcement of the Community's virtual bankruptcy was made here Wednesday by European Commission President Gaston Thorn. He said the commission had imposed a 10-day freeze on some agricultural payments. The group would meet Oct. 14 to decide what measures to take to ensure the Community does not exceed its legal spending limits this year.
It was a fitting climax to this week's three-day jumbo meeting of EC foreign, finance, and agriculture ministers. Although it has become clear that far-reaching decisions must be taken by this December's summit of EC heads of state to avoid severe retrenchment, if not collapse, of the Community, the Oct. 10-12 meetings here produced only small hopes and no concrete decisions.
For years West European leaders have warned the European Community must face up to its severe budget problems or face financial collapse. But as long as the Community was able to muddle through and avoid the politically difficult compromises each country would have to make, nothing was done.
Those days have passed.
The issues are fundamental and highly complex, and to make matters worse, they are tightly interlinked politically and practically, making a package deal the only viable solution.
* Expenditures for the Common Agriculture Policy (CAP), which annually absorbs three-quarters of the Community budget, has spiraled out of control. This year it is 40 percent ahead of projections. Some members, led by West Germany and Britain, have pressed for large cuts in the agriculture budget. Those whose farmers would suffer most from cuts in the subsidy programs, led by France, accept the principle that CAP must be reformed to slow the growth in agricultural spending, but they reject the demand for deep slashes.
* Britain has refused to discuss any reform package that does not deal with budgetary imbalances on a permanent basis.
It is the only net contributor to the Community budget aside from West Germany, even though the British economy is one of the weakest in the EC. The Community has granted Britain rebates the last two years - $650 million in 1983 - after serious threats from London to block any discussion of financial reform.
* To pay for new policies in industrial development, research and technology, and development of less-developed areas of the Mediterranean such as Greece, there must be an increase in the Community's own resources. Otherwise, the inclusion of Spain and Portugal will not be possible. The members must devise a new formula to raise the new funds that will avoid new imbalances such as the current one with Britain. They must also agree whether there should be a legal limit to spending or a more flexible arrangement.
West Germany and Britain are insisting on legal limits and refusing to consider any increase in their own contributions and the adoption of new policies without corresponding cuts in agricultural spending. The other side, pushed by the small countries and France, considers an increase in resources and the new policies as the key to ''relaunching'' the Community and will not approve agricultural reforms without it.
* Any solution will have an effect on trade with the United States, which has warned that any new protectionist measures would be countered.