Europe Under New Management

...At Transport House, the Labor party's headquarters, grim talk can be heard about the British working man's "disorientation," caused by the swift devaluation of both monetary and ethical standards...

...In Britain, for example, it is a daily guess how long Harold Wilson's Labor government can hold on before declaring another round of elections...

...Ultimately, the Achilles' heel of the German economy may be neither textiles nor construction nor automobiles...

...For the moment, Scottish secession is a bagpipe dream, generated by the huge oil fields off the coast, but a British retreat on Ulster would give nationalists there an immense boost...

...This may prove a difficult task: The cost of oil and other raw materials is pushing living expenses up and up...

...In sum, Sweden continues to bask in a pre-October atmosphere...

...As for France's attempt to stimulate exports, this could develop into a beggar-thy-neighbor policy, commonly recognized as the surest way of setting off a global depression...

...None of the Arab countries offer the same investment opportunities...

...Wilson, therefore, has to conduct a delicate balancing act between the unions' expectations of greater sympathy from a Labor government, and the desire of the general public (including the same union members) for a drastic reduction in the rate of inflation...

...At present, experts in Bonn are concerned about three weak spots?or, rather, relative weak spots in the German economy...

...The second is the slightly slackened pace of construction...

...The prevailing optimism of England's consumers, and of government bureaucrats, does not quite extend to the nation's political leaders, however...

...Unfortunately, a world-wide constriction in the automobile market and the entry of American manufacturers into the small-car field have compelled most German plants to reduce production...

...Whether these actions will prove sufficient in the long run remains to be seen...

...In one respect, though, the energy issue has taken hold: Swedish manufacturers and financiers are no different from businessmen elsewhere, and the thought of mountains of money piling up in the hands of a few oil-exporting countries brings a glazed look into their eyes, too...

...At worst, it could lead Germany into cut-throat competition with France for the limited Near East markets...

...Mindful of his narrow victory over the Socialist-Communist candidate, Francois Mitter-and, Giscard has aimed most of the new taxes at upper-income groups...

...Only a few months ago an annual production of 100 million tons, the equivalent of Britain's total 1974 consumption, was predicted for the early '80s...

...If the French continue spending at their present rate, the result could be economic chaos on a national And international scale...

...And much of this optimism stems from the ever-improving estimates of oil wealth in the British sector of the North Sea...

...The first is the textile industry, which some time ago had to switch to higher quality products because competition with cheap, mass-produced Asian goods became less and less feasible...

...And the Welsh independence movement would not be far behind...

...Compared to his own country, where one cannot be sure if events are moving away from war or toward it, all of Western Europe appears blissfully at peace and secure...

...Theoretically, higher gasoline prices should have raised demand for small cars like the Volkswagen...

...So far this is being accomplished by shortening work weeks, paying hefty bonuses to employes willing to accept pre-obligatory retirement, and allowing the contracts of many guest workers to lapse...

...Yet one senses less public worry in London than in other European capitals...

...And with Israeli inflation during the first months of this year running at an annual clip of 35 per cent, none of Britain's or France's price increases are shocking, while West Germany and Sweden seem downright stable...

...Shops are crowded and customers are spending...

...Nonetheless, below the surface of unprecedented prosperity ose can detect a distinct unease about the future...

...Thus, when Giscard became President of France this May, few were surprised that he failed to find a place for Jobert in his Cabinet...

...As in Israel, European voters apparently are unable to make up their minds between their wish for change and their fears about the new and untested...

...The only nation whose balance of payments remains in surplus, it has one of the lowest rates of inflation in the world About 8 per cent...

...Moreover, Giscard indicated that Paris would henceforth take a quieter stance on the Middle East and questions of energy...

...Should the government build nuclear power plants, or is the danger of contamination greater than that of an unalterable reliance on oil...

...There is a great decline in participation in party work at the local grass-roots level...

...The third weak spot, and the area most clearly affected by current conditions, is the automobile industry...

...Having to recognize this fact could, at best, force Schmidt to reorient his thinking toward an EEC united front vis-a-vis the oil producers...

...While the major European powers are being shaken by crises, real and potential, one country on the Continent offers at least temporary shelter from the economic storms...

...A romantic mixture of environ-mentalism and "back-to-nature" longings, the Green Wave has had some effect on the majority of Sweden's political parties, but has most influenced the Center party (the former Agrarian party), today the largest parliamentary group after the Social Democrats...

...Needless to say, the fall three weeks ago of Bankhaus I. D. Herstatt of Cologne, one of Germany's biggest private banks, due to foreign currency transactions, has not enhanced confidence in the solidity of the financial community...

...In the light of further discoveries, the figures have now been upped to 150 million, which should, even with the expected climb in domestic consumption, leave several millions for export...

...In this way, the French President and his foreign minister, Michel Jobert, sought to reap rich economic benefits: assured supplies of cheap energy, and fat export and investment deals...

...France has no share in the North Sea oil, nor any hope of finding major quantities of the precious fluid in territories under its control...

...Yet if the nation as a whole seems relatively complacent, its bankers and economists are not...

...It is simply that the British are hopeful about the future," one economist told me...

...yet any minister who entertains the idea of merely withdrawing from Northern Ireland and letting the rivals fight it out need only consider the growing pitch of Scottish demands for independence to see how unrealistic such escapist notions are...

...The recent bombing of Westminster Hall in the Parliament building brought Irish terrorism into the very heart of the British capital...

...Although the $ 1 billion advance deposit promised by the Shah as part of the agreement will unquestionably help reduce France's immediate monetary shortfall, expected to reach $6 billion this year, the Franco-Iranian accord will account for no more than 6-8 per cent of the long-term deficit...

...In fact, at no stage of the Arab embargo did France suffer from a shortage of fuel, but in its rush to sign bilateral supply agreements, it contracted for large quantities of oil when prices were at their highest...

...More openly than other West European governments, Bonn has pinned its hopes for continued prosperity on "close cooperation with the oil-producing countries" (the word "Arab" is never used), states that have a very small capacity for absorbing a flood of Deutschmarks...

...The booming West German economy is also pumping hundreds of millions of dollars into Spain, Italy, Yugoslavia, Greece, and some Arab nations through salaries paid to hundreds of thousands of "guest workers...

...ever slimmer pluralities are replacing the stable majorities required to execute forceful economic measures and foreign policy initiatives...

...The June 27 pact, heralded in France as a significant step toward the solution of its economic troubles, is, in reality, a relatively minor arrangement when seen against the nation's total payments problem...

...Fearful of a general increase in interest rates, they are even now looking for ways to provide low mortgages for would-be homeowners, whose numbers are growing, and to counter the effects of the large Swedish corporations that are borrowing on Swedish money markets and investing outside the country...

...Nor is this buying spree, if one may judge by outward expressions, marked by the hectic urgency of people unloading their money at any price that is so symptomatic of spiraling inflation...

...Unless considerably more oil is found, though, the surplus will fall far short of covering the non-oil component of Britain's balance-of-payments deficit, expected to be somewhere around $4.8 billion for this year...

...One problem currently receiving special attention actually began decades ago: Inclement weather, low-yield agriculture and an absence of industrial employment have long been forcing people to emigrate from the northern part of the country, transforming once teeming settlements into ghost towns, or villages inhabited by the elderly...

...But his austerity program presents problems of its own...

...On the other hand, given the uncertainty in the Mideast, an Israeli traveler is particularly sensitive not only to signs of impending economic emergency but also to developments in two of the basic issues confronting the West: the monetary crisis caused by the fourfold hike in oil rates, and the parliamentary instability of most Western democracies...

...Industrial production is down 8 per cent from last year, unemployment has declined 11 per cent and the money supply has registered an increase of over Eliahu Salpeter, our regular Middle East correspondent, has recently returned from a tour of Europe...

...More than half of Germany's industrial production depends on the export market, and any large-scale cutbacks in trade would promptly produce considerable unemployment...

...in Britain and France, the figure has to be translated into the real price by means of a special table displayed next to the driver...

...To compensate for this natural disadvantage, the late Georges Pompidou tried to establish a close relationship with the Arabs by acting as their spokesman in the European Economic Community (EEC...

...For Germans, this evokes the specter of 1933, and sends a genuine chill down their collective spine...

...This slowdown is still mainly intentional, the result of government budgetary cuts, but several construction companies have already gone under, and financial circles are worried lest these bankruptcies lead to failures of banks involved in backing the 78 companies...

...People could easily be attracted to some extreme platforms offering quick cure-alls for the social ills...

...In other words, more workers are producing fewer goods and earning higher wages A classic inflationary situation...

...For leaders in Stockholm are well aware that the Swedish economy does not exist in a vacuum, and that the malady threatening Britain, France and Germany is a highly contagious one...

...Are the cities getting too big and impersonal to be really livable...

...The negotiations were conducted under Jobert's direction, and it is no secret in Paris that Pompidou's finance minister, Valery Giscard d'Estaing, disapproved of them: Business affairs should be handled by businessmen, financial experts and bankers, he felt, not by diplomats...

...The Germans are discouraging exports and despite Schmidt's warnings that his country refuses to be Europe's paymaster seem ready to grant credits and even loans to EEC partners to prevent their economic collapse...

...Rather, the city has the appearance of genuine prosperity, unsubstantiated as that prosperity may be by the economic statistics...

...Labor replaced the Conservatives at the beginning of March, thanks to Edward Heath's mishandling of the coal miners' strike, and Wilson's popularity (still growing, according to public opinion polls taken in mid-June) depends on his ability to maintain industrial peace...

...In terms of budgetary policy, West Germany, under its new Chancellor Helmut Schmidt, is the most responsible of the Common Market countries...

...25 per cent...

...Although many observers feel the crest of the Green Wave has passed, they believe the underlying emotions it represented are strong enough to lure young couples back to the north as soon as jobs become available...

...Sometimes it reminds me of Germany before Hitler...

...The hope is that this trend can be reversed through government assistance to northern regions designated "development areas," and by the fallout from a new political force in the country called the "Green Wave...

...A very practical indicator exists, incidentally, for determining the pace of inflation in a country: In Sweden and Germany, the amount shown on a cab's meter is the fare...

...People are confused," one Laborite explained...

...The country's economic woes long preceded the October energy crisis, of course, but one gets the impression in London these days that it is considered impolite to point this out...

...at the same time basic wages, as well as benefits to the aged and to large families, are being increased, meaning that the government may be short-circuiting its own anticon-sumption efforts...

...in addition, the miners' unions-with their strong Communist influence, especially among the Scottish leadership have already announced they will press for wage demands of 40 per cent and more when contracts are renegotiated later this year...

...Luckier than its neighbors, Sweden is both an industrialized nation and a producer of raw materials, so the increase in its petroleum costs has, to a considerable degree, been compensated for by a rise in the price of three of its leading exports, iron ore, wood and pulp...

...Now there is fear that both domestic and foreign consumption of these expensive products will decline radically if a serious recession occurs...

...Boasting Europe's highest standard of living, comparatively steady industrial expenditures and wages, products in a better competitive position than France's and Britain's, and a voting agreement between the Social Democrats and the small Liberal Party that provides a fairly stable minority government under Premier Olof Palme, Sweden enjoys the luxury of being able to concentrate on the problems of a welfare society: Does the tax bite that pays for extensive health, educational and social services inordinately restrict the citizen's freedom to dispose of his income as he wishes...

...Ulster, too, continues to be a headache for the Wilson government, whose latest plan, elections for a constitutional convention in Northern Ireland, inspires little confidence either in Belfast or London...

...In spite of a growing number of new Right- and Left-wing groups, fears of this kind seem somewhat exaggerated...

...Still, Labor is worried, and polls suggesting that Enoch Powell has stronger support among Labor than among Conservative voters are not encouraging...

...In keeping with his general philosophy, too, France's first big economic deal with a major oil exporter following his coming to power was with Iran, which will purchase $4 billion in industrial equipment and technological know-how over a 10-year period...

...This change of policy is due in no small measure to his desire for closer cooperation with the United States something he hopes to achieve without giving up the hallowed credo of "European independence...

...To forestall this, Giscard has been compelled to cut domestic consumption and increase exports...