One conflict may conceal another, less visible but more fundamental. Attention today is focused on the struggle of many countries to join the European Economic and Monetary Union (E.M.U.), which is to be inaugurated on January 1, 1999. At that time marks and francs will be replaced by a single currency, the Euro. Admission to this exclusive club will be decided in the spring of 1998 on the basis of next year’s economic results; hence eligibility is really being determined now. There is much speculation about which candidates will be successful, about the rates at which the currencies will be converted into the Euro and the latter’s strength in terms of the dollar.
Yet hidden behind this Eurobattle is a deeper confrontation over the social shape and political future of Europe. What is at stake is the unmistakable attempt by the international financial establishment and Continental governments to use this whole operation as a cover for adapting the U.S. model of Reaganomics, which has already partly invaded Britain, to the Continent. And the battle is of interest not only for policy-makers in Washington and corporate tycoons in New York. Its outcome is important for all Americans, particularly those not resigned to their current predicament. There are striking signs of resistance in Europe to the economic changes the single-currency system will impose. Should it lead to a successful search for an alternative, the results would be contagious.
Eurostakes. The Maastricht treaty provided five criteria of economic and fiscal performance to determine whether a country is eligible for membership. Given the depressed state of the European economy, three of them (inflation rate, long-term interest rates and currency stability) do not seem major obstacles to most countries. The two stiffest hurdles are the budget deficit, which must not exceed 3 percent of the gross domestic product, and the national debt, which should not top 60 percent of G.D.P. Of the fifteen members of the European Union, two–Britain and Denmark–have still not decided whether they want to take part. The odds on the chances of the thirteen starters fluctuate wildly. At times, the whole project is dismissed as infeasible on the theory that even the two main protagonists, Germany and France, will fail the tests. Then, new rumors have it that all the starters, except for Greece, will somehow qualify. The various predictions hinge on one nation’s budget cuts, the estimate of another’s growth rate and the mood of the judges. All this contributes to the suspense.
In one sense, this tension is phony. The target date of 1999 was set arbitrarily; nothing drastic would happen if the monetary integration of Europe took place a year or two later. Besides, the use of various kinds of window dressing to improve performance is tolerated, making it possible for otherwise iffy countries to pass the test. (For example, France transferred $7.3 billion from the pension fund of France-Télecom to the Treasury to improve its balance sheet.) Above all, when the European heads of government sit in judgment on a country’s application, they will not have to act on bare figures alone. They are entitled by the Maastricht treaty to take into account the progress and direction of an economy. They will have to use this latitude, particularly over public debt, if they want the Euro to take off at all. Even Belgium; considered a sure thing in most forecasts, cannot be expected to reduce its national debt from 130 percent of its G.D.P. to less than 60 percent overnight.