BY CARL-ERIK ISACCSSON
STOCKHOLM, Sweden - "Franco-German strains at EU talks," read one headline in the June 26 Financial Times of London. "Kohl yields to hard-liners on EMU," said another. In the weeks since the June 16 -17 Amsterdam summit of the European Union, the competing interests between the capitalists in France and Germany on how to proceed in the projected European Monetary Union (EMU) have continued to be at the fore.

With elections coming up next fall in Germany, the strength of the euro - as the projected currency is called - has become a central issue. The French government's acknowledgment it will not meet the EMU criteria of having a budget deficit no higher than 3 percent of the gross domestic product this year sparked a flurry of declarations from German politicians.

"A controlled delay [to EMU] would certainly be better than a weak European currency," declared Edmund Stoiber, the prime minister of Bavaria. He insisted that every government entering the monetary union must meet the 3 percent criteria. Stoiber belongs to the Christian Social Union (CSU), which is led by German finance minister Theo Waigel and is the main coalition partner to Chancellor Helmut Kohl's conservative Christian Democratic Union.

Similar statements have been issued by Gerhard Schroder, the prime minister of Lower Saxony and most likely Social Democratic Party candidate for chancellor in the upcoming elections.

The Bundesbank, Germany's central bank, is also warning of the danger of a weak euro. Reimut Jochimsen, a senior member of the Bundesbank's central council, complained June 27 that the agreement signed at the EU summit in Amsterdam, known as the stability pact, "lacks teeth." Jochimsen warned that the euro's "inadequate economic and political foundations" and unresolved economic policy differences between Paris and Bonn "may lead to the disaster of political disintegration" in Europe.

The German government is dependent on a strong currency to be able to attract capital in the international markets to finance the enormous costs of the reunification. Speaking at the Bundestag, the lower house of parliament, June 27, Kohl said he was "certain" the euro would be introduced on schedule on Jan. 1, 1999, as a stable currency in full compliance with the Maastricht treaty criteria.

Meanwhile Yves-Thibault de Silguy, the French monetary affairs commissioner in Brussels, argued that there should not be a "brutal" interpretation of the criteria. Nevertheless, both Paris and Bonn have made plain they intend to carry out further austerity measures in the name of meeting the budget targets.

Finance minister Waigel said June 25 that Germany's 1998 federal budget would involve cuts in nearly all departmental spending plans, and some ministers would see their budgets decline in cash terms. The German government also plans to sell a third of its shares in Deutsche Telekom AG to a state-owned bank over the next two years. The sale, which has the approval of Deutsche Telekom's management, could raise as much as 25 billion marks ($14.5 billion). Other possible sales discussed by the German government include its 36 percent stake in Deutsche Lufthansa and its stakes in five airports.

At a July 7 meeting with Waigel, French minister of finance and industry Dominique Strauss-Kahn indicated that the new Socialist Party government in Paris was planning to take more austerity measures following an audit of public finances due to be published July 21. He would not commit to meeting the deficit criteria in 1997, however.

For now, some capitalists in Sweden, Denmark, and the United Kingdom are benefiting from tensions between Paris and Bonn. In an article headlined "The EMU crisis can raise Swedish bonds," the Swedish daily Svenska Dagbladet stated June 27, "The main conclusion is that the union's currency, the euro, will be relatively weak. This prognosis weakens the D-mark and strengthens the US-dollar. But it has also strengthened the Swedish krona." On June 3 the Swedish government decided not to participate in the first round of monetary union, although it will meet budget deficit criteria.

Both London and Copenhagen are expected to stay out of the first round of EMU. The British pound and the Danish krona have also got a boost lately. This is a serious threat to the stability and strength of the D-mark, as capitalists tend to flee it for safer havens when the German currency is identified with a "French" weak euro.

Carl-Erik Isacsson is a member of the metalwokers union in Sodertalje, Sweden.  
 
 
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