Prospects Fading For Single European Currency

Gloomy economic forecasts for France and Germany, the two engines behind European unification, are raising new doubts - and hopes - about prospects for a single currency by the end of the century.

The figures this week, less than a month after the European Union renewed its commitment to the currency and named it the “euro,” are expected on the agenda at an economic summit of the Group of Seven industrialized nations in Paris next week.

While a Eurocurrency would lower trade barriers and theoretically boost growth in the 15-nation EU, tough austerity measures required to qualify for the monetary union have triggered social unrest and could exacerbate unemployment.

Declining confidence that French President Jacques Chirac and German Chancellor Helmut Kohl can forge the single currency also could trigger unwanted speculative pressure on European currencies.

But Germany’s difficulties, including a growing deficit and slowing economy, may force Bonn to accept more flexibility in the Eurocurrency process and give other countries a breather.

Germany created turmoil this fall when its monetary leaders questioned the ability of some countries to meet the stringent criteria for creating a single currency set up by the 1991 Maastricht treaty - and even suggested making the rules tougher.

“I’m optimistic, now that Germany is designated as a bad student,” said Jean-Paul Fitoussi, head of the independent French Observatory of Economic Performance. It “shows that the criteria must be interpreted differently.”