Tighter Union Pinches Europe
LONDON — AT 10 Downing Street, British Prime Minister John Major's fingers are firmly crossed. He is hoping that moves toward a single European currency are about to be delayed beyond the target date of 1999.
At the Brussels headquarters of the European Union (EU), digits are being twisted for the opposite reason. The hope there is that Economic and Monetary Union (EMU) can be achieved, on schedule, by 1999.
Jacques Santer, president of the European Commission, the executive branch of the EU, says that he will keep seeking a launch of the Euro - the proposed currency unit.
EMU was "a necessary goal," Mr. Santer told a group of bankers, industrialists, and journalists at a briefing in Brussels last week.
But in other European capitals, a lively debate is developing about the feasibility of creating a common currency amid high unemployment and lagging growth. The currency is supposed to make the EU stronger. But in the view of some critics it could turn out to be a political disaster.
Even Jacques Delors, a former EU president, says: "It will be difficult to achieve economic and monetary union within the agreed timetable." Mr. Delors had played a leading part in drafting the 1992 Maastricht Treaty, which laid out a blueprint for solidifying European unity.
Prime Minister Major is taking pleasure from the escalating doubts about the EMU timetable because his government is split between opponents and advocates of deeper European unity. If monetary union could be delayed, says political analyst Philip Webster, Britain's Conservatives would be rid of one of their biggest problems.
IN Germany, the currency issue may threaten the credibility of Chancellor Helmut Kohl, perhaps the most enthusiastic champion of a single European currency. On Sunday Chancellor Kohl reaffirmed his commitment to the timetable. But an annual growth report noted that for Germany to meet the Maastricht criteria for joining a single currency, the country's deficit would have to be 3 percent or less of gross domestic product. Currently the deficit is 3.5 percent.
Moreover, the report noted, unemployment is set to rise to 10 percent, whereas growth this year will be only 1.5 percent, compared with earlier estimates of up to 2.5 percent. The figures suggested that not even the German economy - relatively strong in EU terms - would be able to meet the Maastricht criteria for a single currency.
The picture in France is even worse. Unemployment is 11.5 percent, and the budget deficit is 5 percent of GDP - two percentage points higher than the Maastricht treaty allows for EMU.
Like Kohl, French President Jacques Chirac remains publicly committed to the 1999 timetable. But he knows that France will meet its criteria only by either quickly boosting growth or achieving sharp cuts in public spending. Cuts in public spending will be hard to achieve, since proposed cuts already brought France to a standstill in a 24-day strike in December.
Polls in key countries seem to show wide opposition to the Maastricht goal of a single currency by the end of the century. Despite Kohl's enthusiasm, even German polls show that close to half of Germans prefer their own strong currency to a Euro that might prove to be weak.
In Britain, unsurprisingly, 56 percent are against Kohl and 32 percent in favor.