Europe 1992: An American Perspective

Europe 1992: An American Perspective

Europe 1992: An American Perspective

Europe 1992: An American Perspective

Excerpt

CHARLES L. SCHULTZE

The concept of a united Western Europe has been a major force shaping events on that continent throughout the postwar era. In the economic sphere important progress had already been made by 1985. Early on, agreement was reached and steps gradually taken to remove virtually all the tariffs on commodity trade among the countries of the European Community (EC), initially six, then expanded to nine, and now including twelve Western European nations. In 1979 the EC nations, excepting the United Kingdom, adopted an arrangement to stabilize exchange rates among themselves, and as an indirect consequence gave to the most conservative central bank of the group--the German, Bundesbank--a dominant influence over the monetary policy of the member states.

Despite the progress, economic integration in 1985 was far from complete. While tariffs on intra-Community trade in commodities had been eliminated, merchandise imports and exports within the Community still faced complex and time-consuming border controls. More important, trade in services of all kinds was still protected, firms in one country were not fully free to set up shop in others, and each country had its own set of complex technical standards--for purposes of financial regulation, consumer protection, and compliance with health, safety, and environmental objectives--that had to be met. At the same time, the first half of the 1980s had been a period of stagnation for most European economies. From 1979 to 1986 GNP growth averaged only 1.6 percent a year. And although the inflation of the late 1970s had lessened, the European unemployment rate rose steadily, reaching 11 percent of the labor force. While observers differed on the specifics, most agreed that the European economies had become encrusted with all kinds of rigidities and impediments to dynamic growth from which they needed to be set free.

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