- The Washington Times - Saturday, February 2, 2002

GENEVA Skepticism is growing about the feasibility of the economic cohesion of the 12 European countries that have adopted a unified currency.

Analysts in neutral Switzerland which has kept not only out of the European Union but even out of the United Nations report increasingly cautious assessments of Europe's ability to successfully pull together.

Some analysts, however, say the pessimism is temporary despite the recent fall of the euro and the increasing economic difficulties in Germany and France. On Monday, the euro hit a six-month low with its value now hovering between 86 and 87 U.S. cents.

Both Germany and France face major elections this year, which come at a particularly difficult period and are likely to be exploited by the conservative opposition. Both countries are at present governed by socialists.

"There is widespread and growing dissatisfaction across Europe with the higher prices which have followed the euro's adoption," said an analysts at the Union Bank of Switzerland, one of the world's banking giants.

"So far official statistics have not reflected the inflationary tendency, but when they do, the government will face massive demands for salary adjustments," he said.

Although the German parliamentary elections are eight months away, Europe's attention has been focused on Germany, until recently regarded as the "locomotive" pulling the rest of the European Union.

Edmund Stoiber, named as the joint candidate for the post of chancellor by the two opposition conservative parties, has vowed to scrap a number of key measures adopted by the socialist government. They include parts of economic legislation and a tax-reform program.

Mr. Stoiber intends to succeed where two previous German chancellors failed to eliminate the post-unification slump and halt the unemployment spiral, now exceeding 4 million.

Some among Germany's European partners feel that the task of revising the world's third-largest economy may prove to be elusive and the proposed medicine potentially destabilizing.

According to Dieter Roth of the Mannheim Election Research Group, Mr. Stoiber "became a candidate simply because the economy is sick and he saw a chance." Mr. Stoiber is prime minister of Bavaria, one of Germany's most prosperous areas.

Germany technically entered into recession last fall, and its economic growth this year is expected to barely reach 1 percent.

A recent "quality of life" survey by Sophie Ponthieux of the research institute INSEE pointed out the disparate standards of living of "euroland's" 305 million people with the conclusion that "it is better to live in the Netherlands and Germany than in Portugal."

Euroland is the accepted term for the 12 out of 15 EU countries that have accepted the euro, in circulation since Jan. 1.

Basing its findings on a combination of criteria of housing, and modern facilities such as telephones, television sets and washing machines, the survey concluded that only 46 percent of euroland's households "enjoy material well being."

Thus, according to the study, one Portuguese household out of 10 has no toilet in the dwelling and 12 percent have neither a bathtub nor a shower. In the Netherlands, 60 percent of households enjoy modern conveniences and an adequate living standard.

In Italy, 15 percent of housholds have no adequate heating facilities compared with 3.7 percent in Germany.

The divergencies are unlikely to be eliminated in the foreseeable future, the study concluded.

European analysts say the dissatisfaction with rising prices caused by the adoption of the euro is likely to accentuate the divergencies and cause friction within the European Union.


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