TIME: Almanac 1993/TIME Almanac 1993.iso/time/122391/1223003.000

Text File | 1992-08-28 | 6.8 KB | 143 lines

                                                                                WORLD, Page 29

EUROPEAN COMMUNITY

Blueprint for the Dream


In a historic compromise, the Twelve -- despite Britain's caution
-- reinforce their economic and political ties as they chart the
E.C. course for the rest of the century

By JILL SMOLOWE -- Reported by Adam Zagorin/Maastricht


    In the end there was something for everybody. Britain
could claim that it was still master of its monetary and labor
policies. France could point to a firm timetable for
establishing a single currency for the European Community's
other 11 members. Germany, among the most Euro-minded of the
Community states, could hail the birth of a "European union."
And the most impoverished brethren in the group -- Greece,
Ireland, Spain and Portugal -- had won the promise of money
transfers from the rich states to the poor.

    The summit in the medieval Dutch town of Maastricht last
week, aimed at forging deeper economic and political integration
within the European Community, was a qualified success. After
two days of heated wrangling, the 12 heads of state and
government produced an agreement that took a giant step toward
monetary unity, a half step toward strengthening a separate
European defense organization, and a baby step toward framing
a common foreign and security policy. They also moved toward
pursuing joint action in areas ranging from immigration to
education and labor. "This meeting," said German Chancellor
Helmut Kohl, "has resulted in the fulfillment of a dream.
Further integration is now inevitable. The course is
irreversible."

    The Maastricht decisions will be incorporated into the
1957 Treaty of Rome, the E.C.'s charter document. With its
political dimension expanded, the Community -- the
industrialized world's largest single market with 340 million
people -- should provide much needed stability in the face of
turmoil in Eastern Europe and disintegration in the former
Soviet Union.

    The summit's crowning achievement was the commitment by 11
of the 12 (Britain excepted) to monetary union by the end of
the century. After years of debate, the leaders agreed to
establish a single European Currency Unit, the ECU, as early as
January 1997. But each country must first meet stringent
economic criteria. Among them, total government debt must fall
below 60% of gross domestic product, and budget deficits may not
surpass 3% of GDP. If fewer than seven countries meet the test
by the target date, then the currency will be delayed until
1999, when qualifying nations will put the ECU into circulation
as their legal tender. Countries still unable to adopt the ECU
by that date will do so when their economic performance matches
the E.C. guidelines. In addition, a European Monetary Institute
will be established in 1994 and will later achieve full powers
as Europe's central bank.

    All of this is designed to make Western Europe the world's
biggest economic power, equipped to meet the American and
Japanese challenge. But there are huge caveats. Most important,
Britain demanded a separate "opt out" clause, under which its
Parliament may vote later in the decade on whether or not to
adopt the ECU. Moreover, only three countries currently meet the
criteria. At a time when average E.C. unemployment is nearly
10%, belt tightening to achieve the rigid goals will hardly be
popular.

    The Maastricht decisions raise the prospect of a "two-tier
Europe" in which the economically powerful countries of the
north will pull even further ahead of the nations to the south.
"Countries unable or unwilling to join a single currency,
including Britain, will quickly find themselves facing currency
instability, higher interest and other very tricky domestic
problems," warns David Roche, chief international-portfolio
strategist for Morgan Stanley in London. To help lagging
economies catch up, the E.C. will create a "cohesion fund" to
pour an unspecified amount of cash into transportation,
infrastructure and environmental cleanup in the south.

    The summiteers also agreed to move toward a more unified
foreign policy. This follows the divided stance of the E.C.
during the gulf war and its indecision about whether to send
peacekeeping troops to Yugoslavia. E.C. President Jacques
Delors, who had branded the Community's foreign policy apparatus
"organized schizophrenia," called for streamlined
decision-making procedures. But members shrugged off pressure
from France to adopt majority voting, yielding to Britain's
insistence that a unanimous poll serve as the only basis for
important initiatives.

    On security, the members agreed for the first time to work
toward what the treaty described as "the eventual framing of a
common defense policy." Members designated the Western European
Union, a long inactive consultative group that includes nine
E.C. members, as the new military "pillar," to act in
coordination with NATO. While the treaty calls upon the WEU to
"respect the obligations" of the states belonging to NATO, there
is no categorical statement that NATO will remain the key to
Europe's defense. The three nonmembers of the WEU, Greece among
them, will be invited to join, while Turkey, a NATO ally that
does not belong to the E.C., will be offered associate status.

    The Community had little difficulty accepting joint action
or increased cooperation in the areas of industrial affairs,
health, education and immigration. But labor policy proved far
thornier. Eleven members signed a "social chapter" that expands
E.C. authority over labor practices, including minimum wages,
working hours and firings. Again Britain opted out -- hardly
surprising, given the years of Thatcherite determination to
loosen labor unions' stranglehold on the country's economy.

    While the summiteers hailed the gathering as a success,
some audiences back home were not quite so impressed. In
Britain opposition Labor leader Neil Kinnock argued that Major's
refusal to commit to either a single currency or social policy
"has isolated Britain on the most vital issues." In Germany,
where fears mount that a common currency will undermine the
country's cherished anti-inflationary stability, the daily Bild
Zeitung ran the gloomy headline: "1999 -- THE END OF THE MARK."

    Still, Maastricht marked a major milestone in the European
Community's quest for greater integration. Although the word
federal does not appear in the treaty -- once again, at British
insistence -- the text does call for "an ever closer union."
Three decades ago, Jean Monnet, the E.C.'s founding father,
championed the notion that tighter economic ties would produce
closer political cooperation. In Maastricht that dream was
endorsed with renewed enthusiasm by the leaders of the new
Europe.