Single currency question-mark European Union: Bold plan ignores national economic realities.

January 04, 1996

DON'T SPEND your euros before they clink. It would be a rash speculator who bought European single currency futures on the basis of promises made now. The European Union summit in Madrid on Friday solemnly decreed that a single EU currency to be called the euro will be phased in over three years starting Jan. 1, 1999, by whichever of its 15 members wish and qualify.

That is Germany, and who else? Britain and Denmark adhered to the Maastricht treaty only by reserving the right to opt out of the single currency. Britain means to stay out for the foreseeable future, though a change in its government might change that attitude.

It is not clear that the other major EU economic powers, France, Italy and Spain, will have their inflation, public debt and budget deficits low enough in 1997 to be judged eligible in 1998. Without France, the euro -- a compromise name to be denoted on bills in Latin and Greek -- will not fly. For so little, the Germans would hardly give up that symbol of German national solidity, the Deutsche mark.

Even as the European heads of government embraced the euro recently in Madrid, its basis was being destroyed in Paris. The French general strike was an eruption against economic strictures required by Germany to get the French currency in trim for monetary integration. These were wise and necessary policies, promulgated by Prime Minister Alain Juppe on the orders of President Jacques Chirac, but the French public saw the hand of German Chancellor Helmut Kohl.

Although the strike is losing force, the French economy is crippled with small business failures that ensued and the government has made concessions to railroad unions that undermine the intended reforms. The French public surprised the government by its sympathy for public sector strikers protecting perks denied to private sector workers. The notion that the reforms were to qualify the franc for extinction was too great a cross for them to bear in public opinion.

In the long run, something like the euro is bound to emerge and strengthen Western Europe as an economic superpower rival to East Asia and North America, and as a magnet pulling Central and Eastern Europe. But the Madrid summit set a short-run timetable, even while the immobile trains and clogged roads of France were making it a shambles.

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