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EU: Expansion Neglected Because Of Single Currency

Prague, 26 March 1997 (RFE/RL) -- Former British foreign secretary Douglas Hurd has issued a new warning on the dangers of the European Union's plans to introduce a single currency by the start of 1999.

Hurd told a banking and investment forum in Prague today that the single currency is causing the EU to neglect preparations to accept new members from Central and East Europe, and is also a powerful factor for internal division in the Union.

Hurd, who is now a London private bank director, said that when the concept of a single currency for the EU had been developed some years ago, it was a political as well as economic decision.

Politically, the mood among union leaders at the time was that they wanted to demonstrate unity, to show that "we are so devoted to integration that we must leap forward with a single currency," as Hurd put it. He called this practically a "Maoist" style leap.

He said the difficulty arose in trying to turn the bold concept into economic reality. Currency stability would undoubtedly be a huge gain for Europe, but what had started as an honourable idea to show unity had instead become a factor which clearly divided Europe.

Hurd said EU member states were now split into three camps: firstly, those that can meet and want to meet the strict monetary and financial conditions for joining the single currency by 1999; secondly those that could join by the date but may not wish to -- such as Britain, Denmark and Sweden; and thirdly, those countries that probably cannot meet the criteria, but desperately want to.

Most of the attention has focussed on Britain's coolness towards the single currency, and its desire to choose its own time for joining. But Hurd said the real problem was the third group, largely of Mediterranean countries, that want to join but cannot.

He said very intelligent management is needed now if the EU is not to actually slip backward towards disunity.

He said those that are driving forward relentlessly with the currency union were courageous, but they were imposing burdens on those countries which were trying to carry through difficult structural reforms, such as Germany and France. He said deep-going reform was not an instant event, it took time, and he recalled that reform in Britain had begun 18 years ago -- and was still continuing.

He said the EU should be identified with popular participation, with prosperity, and it was a negative thing that the tough economic constraints being imposed to meet the conditions for a single currency were giving people the impression that "you are going to lose your job because of Europe."

He said one casualty of this preoccupation with a single currency had been that the EU had neglected its preparations to accept new member states from Central and East Europe.

The EU countries had not given enough consideration to problems associated with expansion, such as agricultural policy reform, the allocation of funds for taking in new members, and the necessary institutional changes. This contrasted with the strenuous efforts to gain membership made by the prospective first wave of candidates -- in which Hurd included Poland, Hungary, the Czech Republic and Slovenia.

Hurd noted that since the communist era these countries had tranformed themselves into functioning democracies -- and therefore contrasted well with present EU members Spain, Portugal and Greece before they joined. Poland, Hungary, the Czech Republic and Slovenia had also worked hard to make their economies compatible with the EU, he said.

The EU cannot abandon its enlargement prospects, nor put off candidates any longer with lame excuses. He said the union must energize itself to solve the problems.

Hurd's comments come at a time when analysts believe that the EU may not even be able to reach its hoped-for goal of issuing formal invitations for membership negotiations by early next year to some or all of the Central and Eastern European candidate states.

Hurd said he believes that despite the difficulties, the EU single currency will be introduced on schedule in some member states. But he questioned whether it can be sustained in the long term. And he said the achievements already won, such as the single internal market, must not be allowed to disintegrate amid bad temper and recrimination caused by the single currency issue.