Acorss Europe, governments are getting serious about cutting public deficits in time to meet criteria for a single European currency by 1999. But the task of persuading workers to accept new cutbacks in pensions, hiring, and benefits is becoming formidable.
This week, 100,000 German auto workers went on strike, as well as tens of thousands of French teachers and transport workers.
Nonetheless, budgets for fiscal year 1997 in most of the 15-member European Union aim to cut deficits to within the target of 3 percent of gross domestic product. And national leaders do not take kindly to suggestions that they might fall behind schedule.
A comment by French President Jacques Chirac this week that Italy "may take a little longer" to join a single European currency set off diplomatic fireworks in Rome, where the government had just proposed a tough budget that aims to cut Italian deficits from 6.2 percent to 3 percent in a year.
At the beginning of this year, few financial analysts predicted such a uniform political push to meet these deadlines. But a strong diplomatic offensive from Bonn and Paris early last month sent a clear message that no changes in the criteria would be accepted, and any nation wanting to move ahead on the project of European union would need to meet them.
Making the cut
Last week, Spain passed its tightest budget in 20 years, including $7.8 billion in spending cuts and a freeze on civil servant salaries. Italy's new budget calls for an $8.8 billion "tax for Europe" along with spending cuts - in all, taxes and budget cuts add up to a $40 billion fix designed to drop the budget deficit from 6.2 percent to 3 percent of gross domestic product.
Belgium plans to reduce its deficits by some $2.5 billion by raising taxes and cutting social spending. Belgium's record at cutting public deficits as been "better than France and Germany," Belgian Prime Minister Jean-Luc Dehaene told legislators on Tuesday as he presented his 1997 budget.
As expected, Germany presented a budget designed to bring public deficits to 2.5 percent of GDP; France, to within 1.9 percent by 2001.
"Next year is the last year to qualify for 1999, so all EU members are now targeting 3 percent, but for some, especially Italy, it involves some heroic assumptions, and all are very sensitive to growth rates," says Mr. Horne.
Now European governments face the task of selling the tight budgets to their voters.
Nowhere is that challenge more acute than in France, where unions are threatening to unleash a "social explosion" similar to last year's nearly month-long public service strike, called to protest government spending cuts in public transportation and social security. Last December's strike cost the economy between $1 billion and $1.5 billion, according to the government statistical agency INSEE.
The French government has a tough sell. French President Chirac was elected last year on a pledge to decrease unemployment, which has since increased to 12.6 percent. His own popularity dropped to record lows last month. On Wednesday, Prime Minister Alain Jupp won a vote of confidence from the national assembly on a promise to launch a drive to lower unemployment. French unions charged that the battle against unemployment had been set aside in an effort to meet European targets for monetary union. The government is planning austerity budgets until at least 2001, according to a legislative report released Oct. 1.
In response, public service unions have set Oct. 17 for a general walkout by the nation's 4 million public-sector workers, representing one-fourth of French workers. Last week, railway workers began limited strike actions in Paris and along some southern rail lines. On Monday, some 10,000 teachers staged a mild-mannered protest through Paris to protest education cutbacks, including the elimination of 5,000 jobs. Nationwide, up to 59 percent of teachers at all levels supported the day-long walkout, which organizers described as a prelude to the Oct. 17 strike.
"Our movement is just beginning to find itself," said striking teacher Martine Duval during the march through Paris on Monday. "Here in Paris and out in the rest of the country small strike movements are beginning to spring up. There is a general discontent, and it could flare up ... at any time."
However, analysts close to the government say that it is prepared for limited public-sector protests. Their concern is whether the strike activity will spread to private-sector workers, who sat out last year's protests.
Concessions and concerns
"The government is most worried about what happens in the private sector. If new public-sector strikes develop this fall, and give any sign of moving to the private sector, the government is prepared to make concessions," says a French official, who spoke on condition of anonymity.
Ironically, the nation's soaring unemployment rate could depress strike activity, especially in the private sector, where a strike could cost workers their jobs, this official adds. According to a recent survey, 50 percent of French workers believe they are in danger of losing their jobs and joining the ranks of the exclu, or those excluded from jobs and housing.
In addition, French unions, which are strongest in the public sector, are deeply divided on how to respond to government proposals. Moderate trade-union leader Nicole Notat won plaudits from French government officials and business leaders for her refusal to support last year's strikes.
This week, she was reelected to the presidency of Unedic, a prominent government agency that administers unemployment insurance. Analysts say her election could radicalize rival leaders, such as Workers' Force head Marc Blondel, who contested this election.
Other European nations are also closely watching union response to proposed cuts. Eager to avoid clashes with unions, Italy's new center-left government spared the nation's pension system from its budget cuts. Unions and the government agreed last year that pensions would not be touched again until January 1998. Spanish trade unions have called for protests across the nation in mid-October. And Belgian leader Dehaene backed off plans to increase income taxes, after pressure from unions.