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EU: Brief News Items

Prague, 7 July 1998 (RFE/RL) -- The European Union has begun what is likely to be a long, no-holds-barred, internecine struggle among its 15 member states over how they will share the costs of expansion to Central and Eastern Europe. The EU's Executive Commission has warned the 11 members that will join its new single currency, the euro, in six months to reduce their rising budget deficits. And the Union has been embarrassed by the revelation that it is melting down millions of euro coins it had already minted, and will start all over again.

All three events took place yesterday in Brussels at a meeting of EU finance ministers. Here is an account of each of them:

--At its summit in the Welsh capital Cardiff last month, the EU gave itself nine months to overhaul its budget in preparation for its planned enlargement to the East, even though present arrangements for budgetary contributions will continue through the end of 1999. The leaders said a new budgetary cycle, beginning in 2000, must be approved by a special summit they set for next March in Germany, which will then hold the EU presidency. Judging by yesterday's initial consideration of the problem, meeting the self-imposed deadline is going to be difficult and painful.

The positions of EU member states remain rigid. Led by Germany --which currently provides almost one-third of the Union's $8.6 billion annual budget-- richer members say their net EU contributions should be cut, rather than increased. Poorer members like Greece, Spain and Portugal say that the aid money they now receive from the EU should not be diverted to the new Eastern members. Late last week (July 3), Spain formally proposed to the European Commission that wealthier members contribute even more than now and that poorer nations' pay-ins be reduced proportionately. At least for the time being, that leaves the 10 Eastern candidates between a rock and a hard place.

German Finance Minister Theo Waigel told his colleagues yesterday that, in his words, "we must make savings and cuts" to finance enlargement. Germany insists that its pay-in be reduced, as do the Netherlands and Austria, the EU's number two and three net contributors. But the poorer states worry that, without an increase in EU funds, the money that now goes to their less-developed regions will flow instead to even poorer Eastern states. Greek Minister Yannos Papantoniou said that his country "feels the cost of enlargement could be much greater than thought."

By the end of the discussion it was clear, in the understated phrase of Swedish Minister Erik Asbrink, that "this is n-o-t going to be easy." Because the EU all but shuts down in August, the next discussion will be held in September.

--It won't be easy, either, for the EU's euro-11 to reduce their national budget deficits. The finance ministers yesterday reacted rather negatively to Commission President Jacques Santer's plea that deficits be kept, in his phrase, "structurally under control." Santer said deficits were again on the rise in many of the 11 nations.

The 11 euro countries last year made great efforts to meet the criteria for joining the currency, especially the one demanding deficits no greater than three percent of gross national product. So great were the efforts, in fact, that many neutral analysts accused most the 11 of what is ironically known as "creative accounting," a common enough practice in national budgets.

Even though single-currency criteria remain stiff and allow for heavy financial penalties when they are violated, the 11 ministers did n-o-t show the same creative spirit yesterday. Many West European economies came out of a years-long recession six months ago and are now experiencing economic growth. But France, Italy and other euro-land members have indicated they will use the new income afforded by growth to reduce both taxes and unemployment, high in most EU nations.

Finally, the ministers revealed that, after complaints by associations for the blind and from vending-machine operators, the EU was melting down nine million coins in order to alter their design. The 15 made their decision after blind people complained that the 10- and 50-cent coins were not made according to previously agreed specifications for raising ridges along their edges. The complaints from vending-machine dealers said the 50-cent coin was too light, making it impossible for machines to distinguish it from the 20-cent coin. The mistakes will cost the EU $330,000.

The EU must mint some 7,000 million coins by 2002, when euro bills and coins come into circulation in the 11 countries. On January 1 of next year, the 11 will begin using the euro for non-cash transactions.

The euro, divided into 100 cents, is currently worth $1.1.