Europe takes big new step toward unity '94 monetary union set

Thatcher dissents

October 29, 1990|By Diana Jean Schemo | Diana Jean Schemo,Sun Staff Correspondent

ROME -- Eleven of the European Community's 12 leaders yesterday pledged to surrender control over national monetary policy in January 1994 and to match steps toward monetary unity with the creation of a European political union.

Ending two days of meetings here, all European Community leaders except British Prime Minister Margaret Thatcher agreed to set Jan. 1, 1994, as the date to begin the second phase of a plan to use a single currency by the end of the century.

Yesterday's timetable appeared to be the most far-reaching ste toward the creation of Europe as a supranational body since the 1957 Treaty of Rome envisaged a single market of goods and people.

It also put the Community back on track toward full union after the upheavals caused by the disintegration of the Soviet bloc and German unification.

"At this crucial time for Community integration, the European Council has decided to take a further step toward European unity," said the final declaration issued yesterday.

The declaration said that leaders wanted to progressively "transform the Community into a European Union by developing its political dimension, strengthening its capacity for action and extending its powers." British officials here went on record opposing the extension of the Community's powers.

As with the Treaty of Rome, the Community yesterday acted more on determination than on an awareness of the practical obstacles to achieving economic, monetary and political union in creating their timetable. As in 1957, Britain refrained from joining the movement toward European union.

At a news conference yesterday, Mrs. Thatcher called the plan for political union "a ragbag of proposals" that would pre-empt the work of a December intergovernmental council scheduled to address the details of political union.

She added that Europe would do better to address the substantive questions of a common monetary and economic policy and the different approaches to them.

dTC "To me, it is quite absurd to have all these differences simmering beneath the surface and yet to set a date," Mrs. Thatcher said.

But yesterday's outcome appeared based more on political than on economic analyses.

In the weeks leading up to the summit -- originally slated to discuss aid to the Soviet Union -- German, Spanish and British economic advisers all expressed reservations setting a date for monetary union.

For example, Karl-Otto Poehl, president of Germany's powerful Bundesbank, said last weekend that 1994 would be too early for a single monetary policy. But he appeared to have been overridden by German Chancellor Helmut Kohl, who was eager to signal that German unity would not weaken his country's commitment to European unity.

The timetable outlined by 11 of the 12 member states envisioned giving the Strasbourg-based European Parliament legislative powers and responsibility for monitoring the European political union. They also planned to create an additional, European citizenship for citizens from the 11 member countries and pledged themselves to a common foreign and security policy, the final declaration said.

The timetable for monetary union gave member states until 1994 to assure central banks were free of political interference and to outlaw the financing of budget deficits through monetary policy.

After 1994, member states would have to follow monetary policy dictated by a new institution made up of their national central banks and a Community-wide central bank "exercising full responsibility for monetary policy."

French President Francois Mitterrand said that he hoped these steps would lead to a single currency by the year 2000, although Jacques Delors, president of the European Commission, said the single currency should come sooner.

"We have to be more ambitious than the year 2000," Mr. Delors said.

Although the schism with Great Britain appeared to cut through the major points of the weekend summit and raised the specter of a two-track European Community, it did not appear to dampen the enthusiasm of the other 11 leaders, who said they expected London would eventually go along.

"I've had three or four situations like this before, and finally, everything came out all right and we remained 12," said Mr. Mitterrand. "There's always a degree of tension, and then things go back to daily life."

Giulio Andreotti, the Italian prime minister and summit chairman, said he was also pleased with the meeting. "It's an excellent result," Mr. Andreotti said.

The summit also issued statements demanding that Iraqi President Saddam Hussein release all foreign hostages and discouraging independent visits to Baghdad to win the release of hostages.

But it turned down a request from President Bush that the EC bypass budgetary procedures to rush a promised $1.5 billion in aid to Jordan, Egypt and Turkey, the so-called front-line states whose economies are most affected by the embargo against Iraq.

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