Europe's political climate improves in time for EC summit

When Europe's 10 leaders assemble Monday in Brussels for a crucial two-day summit, they will once again try to scale mountains of butter, wade through lakes of milk, and of course, battle Britain's budgetary contribution.

But this time the quest may be easier than has in the past.

Earlier this week, agreement to produce less milk was unexpectedly reached. The dairy agreement is tentative and does not assure the summit's success. It represents only a first step toward agricultural reform - while saying nothing about how the heads of government will decide to raise needed revenues and reduce Britain's payments.

Nevertheless, it is a big step forward. Milk, mundane as it may sound, presents a profound structural problem for the Community. Production now exceeeds demand by 20 percent, and paying for this useless lake takes up the largest part of the debilitating, ever-increasing subsidies to European farmers.

All the same, until now no one has dared to confront powerful farm lobbies with cutbacks.

So when the milk agreement came, it changed the entire tone for the coming summit. Before, the climb at Brussels was expected to be attempted in bitter, stormy weather. Now, at least the heavy clouds have lifted.

''The fact that such an accord was possible means that Europe can be saved,'' French Agriculture Minister Michel Rocard explained. ''But,'' he cautioned, ''it has not been saved yet.''

The big problem remains money. Largely because of runaway agricultural spending, the Community is nearing bankruptcy. If nothing is done, European Commission President Gaston Thorn predicted this week, there will be a deficit of between $1.8 and $2.4 billion in 1984.

Moreover, the Community faces additional new expenses. While the new dairy accord will cut production, spending on milk subsidies will still rise this year to an estimated $185 million more than in 1983. A plan to dismantle the complicated currency adjustment mechanism also promises to cost unknown millions. Nor will admission of Spain and Portugal come cheaply.

So there is no escape. Some mixture of budget cuts and revenue increases must be agreed on - and it is over this mix that the summit could easily break down. France, the leading agricultural power, favors a sharp increase in taxes. Other agriculturally oriented countries, Italy, Ireland, and Greece, and to a lesser extent, the Netherlands and Denmark, back this approach.

Britain, on the other hand, firmly refuses to pay more for agricultural subsidies that do not benefit its industrially oriented economy. West Germany, too, is reluctant to spend much more.

This split sets the stage for a French-British confrontation at the summit.

The French believe they have made significant concessions in recent weeks. President Francois Mitterrand has agreed that growth in Community spending must be curtailed. And by signing the milk deal, he has signaled his willingness for cuts in agricultural production to bring supply into line with demand.

But it is unclear whether this will be enough for Prime Minister Thatcher. While she agreed to the milk deal, she was still demanding much greater cuts in overall agricultural spending. At the same time, she continues to press for reform that would stop Britain from receiving much less from the Community budget than it contributes.

France is putting stiff pressure on Mrs. Thatcher to budge. Last week, Paris moved to block Britain's l983 budget rebate of some $900 million, decided on last June, until solutions were found to the Community's financial problems.

''Trying to block the funds may well sour the atmosphere of the summit,'' warned an angry Sir Geoffrey Howe, Britain's foreign minister.

But the British are in a tight spot. If they hold up progress at the summit on the rebate issue, then they will bear the brunt of the political blame.

If, too, they finally don't receive their money back, then they must carry through with their ominous - and illegal - threat to begin withholding part of this year's budget payment.

For the French, the stakes are equally high - and dangerous. President Mitterrand has waged his personal reputation on forging a compromise. Since taking over the presidency of the European Council in January, he has traveled to each European capital at least once to sound out positions.

If he agrees to large subsidy reductions, his numerous and volatile farmers will revolt. Such an agrarian uprising is the last thing he needs when different constituencies are already protesting his tough economic austerity plan.

Still, Mitterrand sees large strategic reasons to defy his farmers and patch the Community together. If West Germany is to be kept from going neutral, it must be tied to a strong Europe.

If the Soviet threat is to be blunted, a strong Europe must do more for its defense. And if the American and Japanese high-technology threat is to be stopped, a strong Europe must work together.

After all, as Mitterrand's aides are fond of saying, when Europe's leaders get together, they should have much more important things to discuss than milk production.