World

Europe's quandary

BRUCE WALLACE,NICK SPICER June 16 1997
World

Europe's quandary

BRUCE WALLACE,NICK SPICER June 16 1997

Europe's quandary

World

BRUCE WALLACE

On French television’s nightly satirical puppet show Les Guignols de l’info, Socialist Leader Lionel Jospin’s character is called "Yo-Yo.” A naïve politician forever changing policy direction in hopes of getting elected, Yo-Yo is a takeoff on “Oui-Oui,” a well-known French children’s figure who spends his time aimlessly driving his car around Dreamland looking for ideas. Nothing in the real Jospin’s recent campaign for parliament makes that comparison seem overblown. Jospin promised the French gain without pain. He promised no new taxes and a higher minimum wage, more state-subsidized jobs and a shorter work week. Money-losing state companies would no longer have to whip themselves into shape for privatization or global competition. “Globalization” is a slur in France, seen as an American-inspired plot to rule the world. There would no globalization in Dreamland.

But even Jospin seemed surprised that enough French voters bought the package on June 1 polling day to make him the country’s

new prime minister—albeit propped up by his Communist allies-ofconvenience. Tired of being told that what their job-shedding economy needed was more austerity, the French threw out Alain Juppé’s centre-right coalition. Juppé had been tightening government spending in order to ensure that France qualifies for Europe’s proposed single currency—the euro—slated to debut in 1999. It took the new Socialist prime minister all of a heartbeat after being elected to promise to “reorient” France’s approach to European integration.

Jospin still wants France to join the euro. But he wants a “euro for growth,” controlled by politicians instead of tightfisted, icy-hearted central bankers. That approach augers for a head-on clash with France’s neighbors across the Rhine. A consistent majority of Germans say they have no interest in swapping their beloved, inflationresistant mark for a glorified Italian lira. And if Europe’s governments fail to agree on whether to water down the euro, they may be forced to delay it, or even abandon the long-cherished idea of a single currency altogether. “The criteria for monetary union should not be fiddled or fudged or botched in any way,” warned British Prime Minister Tony Blair last week as political upheaval rattled the continent. “And if they are, the answer is not to delay—the answer is, not to proceed.”

Doubts grow about plans for unity

But fiddling and fudging was exactly what was going on last week in Germany, too. German Chancellor Helmut Kohl has essentially likened the choice over creating a common currency to one between lasting peace or another European war. To convince the skittish German public that the euro will be as rock-hard as the mark, Kohl has consistently reassured them that euro club membership would be exclusive—limited to countries that kept their spending under firm control. No Italy, said Kohl, wagging his thick finger at that country’s profligate ways. No Spain, either.

Imagine Kohl’s distress, then, as it became apparent this year that Germany is unlikely to meet the tough criteria he himself had forced on his European partners. Projections showed Germany’s budget deficit coming in higher than the agreed-upon maximum of three per cent of gross domestic product. That formula has taken on the mystical aura of a non-negotiable barrier. When Kohl discovered he could not cut spending enough to get Germany below the ceiling, he tried a little bookkeeping sleight of hand. His government announced it would revalue Germany’s gold reserves upwards in order to enrich its assets.

But even the burly Kohl cannot intimidate Germany’s formidable central bankers. They balked at his clumsy political

meddling in their longstanding independence, arguing that the revaluation tactic was economically unsound. And after an unseemly week of arm wrestling with the powers at the Bundesbank, Kohl gave in. “The efforts for a united Europe have to be resolutely continued,” he said after his setback. But most observers agreed that he had damaged his credibility as the foremost guardian of a strong euro.

The twin dramas in France and Germany marked a potentially historic turn of events in the slow but steady, 50-year-long march towards European unity. The progress of a closer European Union rests most delicately on the scheme to get all Europeans to buy their baguettes, bratwurst and pints of bitter with the same notes and

coins. The euro’s birth has been an article of faith among the continent’s political class, a matter of “how” to get there, not “if.”

But Germany and France in particular have been rocked by huge protests at almost every attempt to reduce the Europe-wide addiction to state spending. Political leaders coldly presented the cuts as an essential tonic to bring the 15 different European economies into rough parity. But the army of the subsidized, from brigades of coal miners to state airline pilots, saw the euro as the source and embodiment of their pain. “How can one explain the disintegration of the Federal Republic of Germany, whose resolution of social tensions was once considered exemplary?” asked left-wing German novelist Günter Grass in a recent essay. “A horde of bunglers and cutters has been allowed to damage the central pillars of the social contract—health and pensions insurance—and unemployment insurance is hardly safe now from the grasping hand of the state.” Jospin hit the same notes in his successful French campaign. The voters’ choice of the Socialists, he said, “was a demand for an economic and social policy at the service of man.” The declaration was in character for a man who proclaims that he has never lost touch with his roots. “I’m the son of a midwife and a schoolteacher, and I have absolutely no desire to belong to any kind of elite,” the 59-yearold leader told a Paris newspaper. In a country where scandals have racked the political class, Jospin’s probity, at least, was refreshing. He almost quit politics in 1993 because of the endemic corruption in the Socialist party during the late president François Mitterrand’s last years in office. But he stayed on to run as the party’s presidential candidate in 1995, becoming leader of the dispirited Socialist party almost by default, and came surprisingly close to upsetting President Jacques Chirac. He appears comfortable with “stolid” as his descriptive, even if, as he has said, “a sense of modesty cramps and confines me a little.” But whether Jospin’s election platform is anything more than dreamy good intentions is highly debatable. He warned followers not to show up for one of the promised 350,000 government jobs the next morning. And some observers predict that he will be pragmatic, even if that means disappointing many of those who voted for him. “The problem is how the new government will compromise with what they promised the country, which is a major contradiction with what we can afford,” says Edouard de Lencquesaing of the Credit commercial de France, a leading private bank. “And we have to solve the social security problem, where we have a much bigger deficit than we thought.”

Yet there is also a prevailing sense that Europeans have had enough of the culture of cutbacks—turning away before they ever went far enough to give free-market solutions a chance at reviving their economies. A superficial glance s around the European political scene reveals more ostensibly | left-leaning governments than at any time since the 1970s.

I French Socialists took comfort from the Blair-led Labour I victory in Britain, just as the German left accepted Jospin’s 3 upset as the shot of adrenaline it needs to finally topple Kohl i in elections to be held next year. Certainly the European Union’s bureaucrats have a second wind, hoping that the time is right to introduce a host of new business regulations.

If so, they have misread Blair, who has been highly creative in redefining what left-wing means. He believes that binding business with more labor laws is a now well-tested recipe for higher joblessness. ‘To be unemployed because of a government’s good intentions does not make the situation more pleasant,” he told Socialist leaders gathered in Sweden last week. “Modernize or die.” If Blair and Jospin are to become fellow travellers, the French Socialist will have to leave Dreamland, taking a hard right along the way.

With NICK SPICER in Paris