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EU: Next 24 Hours Critical For EMU And East's Membership Hopes

Prague, 11 June 1997 (RFE/RL) - There is an atmosphere of impending crisis in the European Union today. The next 48 hours are likely to prove crucial to its long-scheduled plans for launching a European Monetary Union (EMU) in early 1999 --and, therefore, to Central and East European hopes for rapid EU entry.

The connection between EMU and the Union's planned expansion to the East may appear remote, but in fact there is a direct relation between the two. That's because EMU's successful birth is essential to the 15-nation Union's fulfilling its oft-repeated pledges to begin membership talks early next year with some or all --more likely some rather than all-- of the 10 Central and East European candidate nations (Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia).

Were EMU's launching to be called into question, or its nature changed, membership negotiations with the Eastern nations would surely be affected --at the least substantially delayed, and at worst derailed for years. In other words, a failure to achieve agreement on a single currency would add up to a full-scale crisis in the EU.

Meetings in France tomorrow and Friday will determine EMU's fate. First, on Thursday, EU Executive Commission President Jacques Santer will be in Paris to meet both with Socialist Premier Lionel Jospin and the man Jospin now shares power with, conservative President Jacques Chirac. Santer will offer both French leaders a compromise between demands for changes in agreements about regulating the EU's new single currency --known as the "euro"--made by Jospin's ministers earlier this week and what the Commission believes possible to do.

Then on Friday, in the central French town of Poitiers, both Jospin and Chirac are due to meet with German Chancellor Helmut Kohl, EMU's biggest supporter in the Union, and work out some compromise with him as well. That may prove more difficult than dealing with Santer because Kohl, the Bundesbank (central bank) and a large part of the German people want a euro that will be as secure and "hard" a currency as is their cherished mark. That is not a high priority for jobs-minded Jospin, which accounts in no small part for the current highly strained relations between Bonn and Paris, traditionally the EU's bilateral "motor" of internal integration.

Jospin's campaign promises to make high French unemployment his first priority by creating 700,000 jobs in 12 months would probably make France ineligible for joining EMU in 1999, at least under the strict criteria that were set down in the 1992 Maastricht Treaty. But there is always the possibility, which now appears increasingly likely, that the 15 will decide to soften the standards sometime between now and January 1, 1999.

Today, Kohl was due to meet in Bonn with Prime Minister Wim Kok of the Netherlands, whose country currently holds the EU's revolving residency. Yesterday, Kok saw Jospin and Chirac separately in Paris in a first attempt to find common ground among Jospin's Government, Germany and the EU.

All of these urgent, extraordinary meetings are taking place only days before the EU's summit meeting in Amsterdam begins on Monday (June 16). The two-day summit is due to ratify previous EU agreements on EMU and, not less important, agree on basic institutional reforms for the Union before it expands Eastward. If it fails on either score, Eastern hopes for quick membership will suffer accordingly.

The meetings follow an equally extraordinary two days (Monday and Tuesday) in which important ministers in the newly elected French Socialist-led Government signaled it would n-o-t sign on to an important EMU agreement agreed to by the previous conservative government and the other 14 EU members. On Monday, Jospin's super-Minister for the Economy and Finances told his EU colleagues at a meeting in Luxembourg that his coalition Government, which includes Communist ministers openly hostile to the euro, would need a longish "period of reflection" to review France's commitment to the so-called Growth and Stability Pact agreed to by all 15 in December. A day later, Minister for European Affairs Pierre Moscovici said that his government needed what he called "a real delay" in considering approval of the stability pact and predicted the Franco-German Friday summit at Poitiers would be the start of what he dubbed "operation truth."

The stability pact, initiated by Germany, would insure that the same strict criteria that now determine entry into EMU --notably, low national deficits and inflation rates-- would prevail for those countries that joined. EMU countries that violated the standards would be subject to stiff monetary penalties.

But yesterday, after meeting with Kok --and probably talking with Chirac, who earlier in the day publicly reaffirmed his firm support for EMU-- Jospin seemed to back away from his own ministers' remarks. "We will do it together," Jospin told reporters, apparently referring to signing the stability pact at Amsterdam. Kok said that it was not only important to attain monetary union, but also to achieve what he called "an economic and political union coordinated for ordered cooperation over jobs."

Kok's remark hinted at the nature of the compromise likely to be offered to Jospin by Santer tomorrow. According to officials in Brussels, France will be asked to sign at Amsterdam the stability pact ensuring budgetary discipline in the forthcoming euro-zone. The Commission regards the pact as vital to prevent a collapse of confidence in the entire EMU project. In return, the officials say, the summit will also issue a formal commitment to translating French demands for the pact to include a greater emphasis on jobs and economic growth into enhanced economic cooperation between all EU governments after the launching of the euro.

That's the scenario for a successful agreement, and it seems a reasonable way of avoiding a full crisis. But a lot of ill-feeling has been created within the EU in the past two weeks, particularly between France and Germany, and few can say with certainty that reason will prevail. By Saturday, however, we should know what the prospects for success at Amsterdam really are.