Jobs Agreement Keeps Euro On Track Deal Mollifies Both Germany, France

European leaders saved their endangered single-currency project Monday with a dose of rhetoric and a dash of new programs, averting a dispute between Germany and France that had been the biggest threat yet to the inauguration of the money on Jan. 1, 1999.

Declaring himself “relieved and happy” that the weeklong crisis had been resolved, Dutch Prime Minister Wim Kok, whose nation holds the rotating presidency of the European Union, said: “There are only winners” in the struggle’s outcome.

The leaders agreed to convene a Europe-wide summit on jobs next fall, to add new language stressing employment to the single-currency agreement and to look into redeploying some European Union investment resources toward small business and public works. All the measures were designed to answer French objections that the path toward the single currency stressed budgetary discipline too much and employment too little.

These modest measures drew immediate French praise for the EU’s “decisive step in the re-balancing” of Europe’s new monetary structure, while Jacques Santer, president of the European Union’s chief administrative body, the European Commission, said the accord will make it possible “for European monetary union to begin on schedule.”

Few flaps over the 6-year-old plan to replace national currencies with one, the euro, have come as close to derailing the project as this one. It pitted the politically threatened German chancellor, Helmut Kohl, against the politically resurgent Socialist prime minister of France, Lionel Jospin - and the fundamentally different views those two nations hold of an economically united Europe.

In the end, those differences were accommodated, not resolved. Jospin comes away with a renewed mandate to continue to push Europe toward more focus on employment and growth - which in his view is best addressed by spending more government money. Kohl, on the other hand, remains determined to keep Europe on the path of fiscal rigor before its currencies are blended into one.

“We are going to have more trials of strength in the months and years ahead,” said Christopher Potts of the Paris-based brokerage firm Chevreux de Virieu. “This is not an end; it’s a beginning.”

Among other future struggles, France, Germany and nearly all other euro applicants face a common problem: With the moment of selection less than a year away, it is becoming increasingly clear that almost no nation - not even Germany - is going to get its deficit as low as required.

In negotiations designing the euro in the 1991 Maastricht Treaty, Germany insisted that any nation desiring to be included must reform its economy and its budget to tame inflation and reduce deficits to 3 percent of gross domestic product.

Inflation is indeed in check nearly everywhere in Europe. But 1997 figures will determine whether the deficit criterion has been met, and it is a virtual certainty that for most countries it has not. Just last week, the Organization for Economic Cooperation and Development predicted that France, Germany and Italy would rack up deficits of 3.2 percent of GDP this year.

The difference seems tiny. But Kohl and his finance minister, Theo Waigel, have insisted that, in Waigel’s words, “3.0 percent means 3.0 percent and not 3.2 percent.”

With Kohl politically weakened by internal dissent, high unemployment and the costs of reunification, Germany is given almost no chance by financial experts of producing the budget cuts necessary to meet the target. France, with its new Socialist government, is uninterested in doing so. Other countries, particularly Spain and Italy, have gone through enormous political pain to cut spending, but remain off the mark and are willing to join under any circumstances.

Facing the nations of Western Europe is a choice of fudging, delaying or changing the requirements. But any of those would upset the financial markets, which in recent months have been banking on a successful euro, even if it is weaker than the Germans have in mind.

The dispute that was resolved Monday arose as a result of the sudden ascension to power of the Socialist Party in France, which overturned the center-right coalition of President Jacques Chirac in the legislature after Chirac unexpectedly called early elections. As president, Chirac keeps his job, but the political agenda now belongs to the left.

Jospin often said on the campaign trail that he was a proponent of Europe and of the euro, but not of austerity. He tapped into a deep-seated public concern about the single currency that most European politicians have tried to ignore, and it helped elect him and his party.

British Prime Minister Tony Blair, making his debut on the European stage, generally sided with the Germans in favor of budgetary strictness.