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1997 In Review: EU Finds Success On EMU, Failure On Expansion Reforms

Prague, 17 December 1997 (RFE/RL) - In 1997, the European Union faced two major challenges: cementing its coming Economic and Monetary Union (EMU) and preparing for its promised expansion to Central and Eastern Europe.

The EU dealt with the first challenge handily. It set its new common money, the euro, on a solid course for launching as an exchange currency in a year's time, and for the introduction of euro bills and coins throughout the Union in 2002. Much of the 15-nation bloc's energy and attention during 1997 was focused on ensuring EMU's successful start.

That's one big reason why the EU all but flunked its other great test this year. Member states failed egregiously to agree on any of the basic reforms needed for a swift and smooth incorporation of 10 Central and East European candidate states -- plus Cyprus, an earlier applicant-- in the first years of the 21st century. Their failure called into serious question the timetable for the EU's planned expansion to the East.

At two highly publicized summits -- in June in Amsterdam, and last week in Luxembourg -- the EU was unable to achieve the necessary consensus on any of the fundamental changes essential before undertaking enlargement to almost twice its present size. These changes are of two kinds: 1) institutional reforms, such as refashioning voting procedures and the size of the EU's Executive Commission; and 2) modifications in its agricultural and regional funding, which today eats up four-fifths percent of the EU's budget and could never be extended to the East in its present form without bankrupting the Union.

Both the Amsterdam and Luxembourg meetings were preoccupied with EMU questions that were not even on their formal agendas. In Amsterdam, the first of two days of often acrimonious debate was taken up entirely by the resolution of a Franco-German monetary dispute. It centered around the nature of a strict, so-called stability pact for members joining EMU at its outset in January 1999, and who -- politicians or bankers -- should have the final word on the euro's evolution.

On Amsterdam's long second day, which actually ended at four o'clock the following morning, the bad-tempered talk grew even sharper. This time it ended not in resolution but in transparent irresolution and, ultimately, open temporizing. Led by Chancellor Helmut Kohl, the longtime integrationist leader who has turned cautious in the run-up to next Autumn's German elections, a majority of EU members succeeded in pushing through a formal deferral of any basic reforms until expansion actually gets under way.

Later, an important minority of three members --Belgium, France and Italy -- issued a joint statement saying they would not support expansion unless the necessary reforms were enacted beforehand. In an organization that demands consensus on such matters, their strong dissent presaged a possible paralyzing crisis over enlargement within the EU. Several analysts said such a crisis would most likely occur after the euro was launched in early 1999, and some believed it would be the most severe in the EU's four-decade history.

In Luxembourg last Friday and Saturday, EU leaders did manage finally to name the Eastern candidates with whom the organization will first open membership negotiations. They chose to go along with the recommendations of the EU Executive Commission, which in July had picked the Czech Republic, Estonia, Hungary, Poland and Slovenia -- plus Cyprus -- as the most economically advanced group for a first wave of talks. Few EU officials expect those talks to take less than four years. Many believe they could take far longer than the seven years needed to negotiate the entry of Spain and Portugal a decade ago.

Like the Commission, too, the leaders left the five other Eastern candidates -- Bulgaria, Latvia, Lithuania, Romania and Slovakia-- waiting for a so-far undated second round. The first four were rejected for economic reasons. Slovakia was omitted because of its unacceptable record in democratic and human-rights practices. As a sop, the summit designated all five as part of the "overall accession process."

The EU tried a similar tactic at Luxembourg in offering Turkey, a perennial aspirant for membership, an invitation to a proposed standing European Conference to be composed of 27 nations -- the EU 15, the 11 candidate states and Turkey. But this time the tactic backfired. Furious at not even being considered for membership, Ankara brusquely rejected the invitation, said it would freeze all political contacts with Brussels and indicated it would seek what Prime Minister Mesut Yilmaz called a new "strategic partnership" with the U.S. That left the Union with a big Turkish problem that could easily affect Cyprus' membership, since Ankara has occupied the northern half of the island for a quarter-of-a-century and is now threatening to incorporate the area into Turkey proper.

The Luxembourg decision on expansion to the East finally began to fulfill the EU's repeated promises about integrating the two halves of Europe. But it came more than eight years after the collapse of Communism in the East and over four years after the EU had decided on the principle of expansion. That history does not bode well for a swift integration of the five Eastern fast-track nations, no less the other five deemed still not ready for substantive talks.

Even so, the Luxembourg summit, like Amsterdam's, was largely taken up by EMU matters -- in this case, a quarrel over the which nations should be part of a proposed politically oriented euro council to help supervise the management of the new currency. The dispute was settled when Britain, the leader of a group of four EU members not joining the euro at the outset (Denmark, Greece and Sweden are the other three) received assurances that no decisions concerning the four EMU "outs" would be taken without consulting them directly.

In the end, 1997 will probably be remembered less for what EU leaders called Luxembourg's historic decision to begin "widening" to the East than for the group's concentration on its own internal "deepening." That deepening was most notable on matters involving monetary union, but was also reflected two months ago in the Union's first ever summit meeting on dealing with its chronically high unemployment rate.

As for expansion to the East, it's clear that many serious problems remain to be resolved before it becomes a reality. The problems are not only for the Eastern nations seeking to meet difficult EU standards, but for West European members, which have yet to prove they are serious about enlargement by effecting the reforms necessary to make it feasible. Only time -- probably a long time -- will tell whether their actions will match their rhetoric.