The Looming Euro

...Another criterion for EMU eligibility is a national debt ceiling of 60 per cent of GDP...

...Thus it seems likely that the euro will enter limited circulation by the projected 1999 date—even if some nations do not join at first, even if some governments resort to egregious accounting methods to be eligible, even if the initial consequences of its appearance suggest the whole idea was a mistake...

...The Clinton Administration supports European integration, but there is some concern in Washington...

...Former British Chancellor of the Exchequer Lord Denis Healey (once a regular New Leader contributor), has warned that the strain of benefit cutbacks in Britain would "produce riots on the streets, as they already have in France...

...With only minor border restrictions remaining, business and labor might then seek to escape local wage and price pressures by shifting to more agreeable climates within the community, complicating matters further...

...In Germany, though, workers are enraged by a government plan to reduce just their sick pay entitlements a mere 20 per cent...

...There is still no guarantee the complex step toward unification will actually be taken...

...In any case, U.S...

...As a headline of the International Herald Tribune succinctly put it: "Euro Threatens Dollar's Clout...

...In Germany and France, for instance, the issue has sparked mass demonstrations...

...With solid backing also from French President Jacques Chirac, the European Commission, brushing aside the dire forecasts of cassandric economists, insists 12 of the EU members (with Britain, Italy and Greece excepted) are on course to meet the tough euro club membership requirements...

...To genuinely reduce their deficits, the EU countries will have to slash their generous pension, healthcare and unemployment insurance programs...

...The apparent confidence of the European Commission in Brussels notwithstanding, anxiety about the single currency persists...

...United States Treasury officials, recognizing that the euro will probably appear on schedule, have begun examining its implications for America...

...Additionally, a stronger EU would be in a better position to assist the struggling economies of Eastern Europe and other parts of the world, lessening America's burden...

...In short, the entire region would benefit greatly from access to the hugely expanded financial market that would be created...

...While some EU countries are dazzled by its promise, others fear its possible consequences...

...London's greatest fear is that the British taxpayer will have to pick up the tab for the huge existing pension liabilities of other euro nations...

...A more prosperous Europe, they note, would be able to reduce its relentless unemployment—close to 13 per cent in France, and an average of 11 per cent across the EU (compared with 5 per cent plus in the U.S...

...is one of its chief proponents...

...The entire euro community would therefore have to respond to internal crises in a particular country, and thriving economies would have to bear most of the burden...

...sory passport formalities) can see that Europe is well on its way to amalgamation...

...And it would allowmore efficient mechanisms for controlling inflation...

...The arguments against monetary union, however, are not insignificant...

...Moreover, although the euro's dreary, neutral name was deliberately chosen to avoid nationalistic jealousies, Britons are not alone in questioning whether local currencies—key symbols of identity, not to mention essential tools for regulating national economies —should be tossed into the dustbin of history...

...But Treasury people maintain that will not happen...

...Even Germany, Europe's economic locomotive, may be unable to meet that requirement in time...

...With the euro, French economist Jean Monnet's dream of a United States of Europe—whose first result was the creation of the European Coal and Steel Community in 1952—would enter its final stage of realization...

...There are reasons to worry about the effects of the euro's introduction as well...

...France has already engaged in creative accounting to give the illusion of having addressed its shortfall with $7 billion in profits from the partial privatization of the state-owned telephone monopoly...

...In addition, if one euro club nation faced internal economic difficulties, it would be unable to adjust its currency to recover balance...

...A single currency is essential to unifying Western Europe and developing its enormous economic potential...

...They believe the euro will probably be factored into the global economy gradually, perhaps over a decade or more...

...Once it is in circulation, much of the vast amount of dollars now held by European banks would become surplus...

...It would eliminate the expensive, irksome currency conversion that has been an unavoidable component of cross-border business...

...That could effectively devalue the dollar...

...How straggling Greece would ultimately fit into the picture is anyone's guess...

...It is the euro—the new monetary unit that is supposed to begin replacing the pound, mark, franc, lira, and other currencies of the 15 European Union (EU) nations on January 1.1999...

...Imagine Danes being asked to pay the price for problems in Spain, or Ireland footing part of the bill for a glitch in the Portuguese economy...

...In fact, of the 15 EU members it appears that only tiny, prosperous Luxembourg would qualify if the membership rules were strictly observed...

...For one, the euro's imminent arrival may exacerbate inflationary pressures as nations scramble to meet the tough conditions for joining the euro club...

...Anyone boarding the Eurostar at Waterloo Station in London, riding the train through the Chunnel, and disembarking three hours later at Gare du Nord in Paris (with no stops in between and only curNorman Gelb reports regularly for The New Leader on British affairs...

...The arguments in favor of the EMU are compelling...

...it may prove the most significant event in Western Europe since the collapse of the Third Reich...

...To be eligible, a nation's budget deficit must not exceed 3 per cent of its Gross Domestic Product (GDP...

...The danger is that Britain might face the same disadvantages it suffered from not being a founding member of the European Community...

...Nevertheless, the establishment of a European Monetary Union (EMU) is moving forward...

...According to the report, if Britain were to join the EMU its share of the EU's total liabilities would reach a staggering $50,000 "for every man, woman and child" in the country—unless special provisions were made...

...Helmut Kohl, the longest serving German Chancellor since Bismarck and the most influential figure on today's European stage...

...Its failure to emerge as planned would indeed be a humiliating setback for EU bureaucrats, and particularly for the German and French governments, which are deeply committed to the euro and furious with British shillyshallying...

...government and business analysts predict that an integrated European economy will spur demand for American goods and services...

...London Times economic analyst Ana-tole Kaletsky has observed that Europe's political elite has built up immense momentum in favor of the EMU...

...They lean toward a wait-and-see approach: staying clear at first to assess how adopting the euro works for the EU as a whole and for the individual participating nations...

...Commenting on this questionable ploy, Italian Prime Minister Romano Prodi has promised "a trick or two" of his own to get his country's deficit down to the mandated level...

...But if it is...

...Here in Britain, neither the Tory government nor the Labor Party Opposition can make up their minds about it...

...Given the circumstances, it is easy to understand the reluctance of Prime Minister John Major and Labor Party leader Tony Blair to commit themselves to either joining the euro club or keeping Britain outside its framework...

...To be sure, the euro could mount the only serious challenge the greenback has had to face since World War II as the world's primary reserve currency...

...Having overseen his country's reunification he is now determined to unite Europe, and views the euro as the best instrument for completing the job...

...Again, not even Germany is expected to achieve that level...

...A recent House of Commons report states that while Britain's pension liability has been held to 19 per cent of GDP, in France it stands at 98 per cent and in Germany it is almost 140 per cent...

...Instead of showing strength, for instance, at least initially it could suffer debasement as common ground is sought between the value of, say, a strong mark and a shaky lira...

...increasing disposable income...

...Even in countries where the political leadership argues strongly for integration there are widespread public doubts...

...By the time it finally joined, its ability to influence the Common Market's direction and control was weak...