With Common Currency Looming, No European Consensus

December 12, 1998

With Common Currency Looming, No European Consensus

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By CRAIG R. WHITNEY

IENNA -- The European Union has always had grand plans, and great trouble agreeing on how to carry them through.
It will start a new common currency to rival the dollar on world markets, the euro, next month. It has ambitions for a European foreign and security policy, with military means to back it up.
In the next decade, it intends to take in formerly Communist countries, swelling membership from 15 nations to 20 or 25, with a population and economy far larger than those of the United States.
But what leaders of this supposedly united Europe are doing at a summit meeting here this weekend is squabbling, as they have been for years, about how much expansion will cost. The argument is about both money and the efficiency of procedures assuring vetoes of the original three small members of the 1957 European Economic Community -- Belgium, Luxembourg, Netherlands -- over decisions by the original three large ones, Germany, France and Italy.
France and Germany both agree that without changes to cumbersome decision-making procedures, and to fat agricultural subsidies designed when France was a weak agricultural economy and Germany was a powerful industrial one, expansion will lead to political paralysis and financial chaos.
European leaders tried but failed to agree on change at a similar meeting in Amsterdam in the summer of 1997. Now, on the eve of the emergence of the euro, officials said Friday that the most they expected to do here was to chart a course for more negotiations and hope for a breakthrough by next March, when a summit meeting is planned.
"Willingness to compromise and concessions by all the member states in all areas are absolutely necessary," President Jacques Chirac of France and Chancellor Gerhard Schroeder of Germany agreed before the meeting.
But if they meant that Prime Minister Tony Blair should consider a cut in the British rebate from the European Union budget that Margaret Thatcher negotiated for Britain in 1984, they were disappointed Friday.
Blair made absolutely clear that Britain intended to keep every penny of the rebate, which brought Britain's contribution to the nearly $100 million European Union budget down by $2.4 billion this year to $13.6 billion.
"It is fair," he said as he arrived here. His spokesman, Alistair Campbell, added, "The point is, it is not negotiable."
And France itself has no intention of making any changes to the $45 billion European agricultural support system that would require it to pay subsidies out of its own national budget. The agricultural policy now consumes nearly half the total European budget.
The European Union Executive Commission in Brussels has proposed cuts of up to 30 percent in meat subsidies and 20 percent in grain subsidies to farmers before a new round of talks next year with the United States and other countries on agricultural policies.
Even with those cuts and with member states taking over $5.85 billion of the costs of the agricultural policy, the Commission predicts that its cost to the European Union will rise to nearly $59 billion by 2006, after the first few Eastern European countries come in.
The system would become unworkable, the French agree, if changes of some kind are not implemented before Poland, with tens of thousands of inefficient small farms, becomes a member. But they have pronounced the Commission's proposals unacceptable.
In the past, Germany always ended up coughing up money that France and other smaller, less wealthy states were unwilling to provide. But Schroeder now says that it is highly unfair that Germany pays 26 percent of the European Union budget, putting in nearly $13 billion more than it gets back from Brussels in agricultural, regional development and other European funds.
"Germany is being asked to do too much if fairness in contributions is not on the agenda," Schroeder said.
As France's foreign minister, Hubert Vedrine put it recently, "It looks insoluble."
But, he said, the European leaders had no choice but to try.
Not all was gloomy as they met Friday in the vast and ornate rooms of the Hofburg Palace, the seat of the vanished Austro-Hungarian empire. The european commissioner for economics, Yves-Thibault de Silguy, said that leaders this morning congratulated themselves on having created 1.7 million jobs in Europe in 1998, reducing the European-wide unemployment level to just below 10 percent.
And Europe, former Chancellor Helmut Kohl of Germany told the leaders Friday, should only partly be about wrangling over which countries should pay how much and how many Commissioners they should be able to name to Brussels. More important, he said, should be the political vision of Europe. The people in the east and southeast of Europe expected the west to keep its promise to recognize them, too, as a part of Europe, he said.
The leaders named Kohl "Honorary Citizen of Europe" at lunch Friday in gratitude for his work toward European unity during the 16 years he was chancellor before Schroeder defeated him in September. He thanked them but said he had no wish to be treated as a monument.
"You know what happens to monuments when the ceremony is over," he said. "The birds sit on them and do things."

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