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Is Europe's Express Train To Unity Slowing Down?


International Outlook

IS EUROPE'S EXPRESS TRAIN TO UNITY SLOWING DOWN?

In just 11 months, the world's largest and richest trading bloc will officially come into being. But instead of romping down the homestretch toward a united Europe at the end of 1992, Europeans are beginning to sulk under the weight of a widespread economic slowdown.

The outlook is for the European Community's economies to grow at a disappointing 1.5% in 1992--down from 2.5% in 1991. This downturn is leading to bickering and discontent that could brake the momentum that the European unity freight train gathered at this past December's Maastricht summit. General elections are looming in many EC nations. At the very least, the need to play to domestic audiences and address economic problems is bound to divert politicians' energies from stumping hard for monetary and political union.

Indeed, many of Europe's old guard find themselves on shaky ground. In France, not only is 1992's leading advocate, President Francois Mitterrand, expected to retire by 1995 but he could also be forced into cohabitation as early as 1993 with a right-wing Parliament less sympathetic to the project. And British Prime Minister John Major, a deft compromiser on European issues, faces a stiff test from Labor later this year.

IN ECLIPSE. Nationalism is clearly on the rise. Across the Continent, extremists such as France's anti-immigration leader Jean-Marie Le Pen, German neo-Nazis, and other rightists are hoping to embarrass the Establishment by making a strong showing in local elections this spring.

As the witching hour for European unity draws near, resentment is growing over Germany's increasingly dominant position. Europeans blame the interest rates set by the Bundesbank for aggravating their economic problems. "High German rates are hurting everybody," says Eric C. Elstob, deputy chairman of Foreign & Colonial Investment Management Ltd. "The pain is being spread across all of Europe."

While other countries look on uneasily, the Germans are parlaying their economic clout into increasing control over the EC political agenda. Last week, they twisted arms to get unanimous EC recognition of Croatia and Slovenia. Not surprisingly, the new German show of strength is creating unease in France, which has been eclipsed as the EC trailblazer. Some French politicians and intellectuals are decrying the single currency and other points agreed to at Maastricht. "France is renouncing its right to coin money, a right we have had since Philippe le Bel [a medieval king]," complains Marie-France Garaud, chairman of the International Institute of Geopolitics in Paris. "This is a major loss of sovereignty."

The downturn and the stepped-up job cuts at companies ranging from Italian computer giant Olivetti to France's Peugeot are also fanning protectionist feelings. German Chancellor Helmut Kohl, for instance, wants the EC to embrace Eastern Europe and the former Soviet Union, but other countries, such as France, are digging in their heels for fear of losing further jobs to cheap Eastern labor. "Germany sees great potential danger in what is happening in Russia and other former Soviet states," says German Foreign Ministry adviser Jochen Thies. "Yet other European and Western nations are looking the other way."

Does the current bout of dyspepsia mean European unity is in trouble? Most observers say not yet. But the political consensus that has driven 1992 is showing the first signs of fraying. Chances are that Europe in the '90s will witness a political shakeup to rival its economic restructuring.

by John Rossant in Rome, Richard A. Melcher in London, and Stewart Toy in Paris

EDITED BY STANLEY REED


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