One Europe: The Dream of Unity : Next Step : A Divided Continent Sees Shared Destiny : The breeding ground of two world wars is trying to erase old boundaries. Up to 30 nations hope to meld into history’s largest voluntary confederation.

It won’t happen in 1992. It won’t even happen in the 1990s.

But, gradually and painstakingly, the continent whose bloody rivalries bred this century’s two cataclysmic world wars is transforming itself into something that might one day resemble a “United States of Europe.”

Never in the history of humankind have so many nations voluntarily come together to sacrifice so much of their sovereign power. From mighty Germany to tiny Albania, as many as 20 or 30 nations are in various stages of binding themselves into a confederation that will share

a common economic and even political destiny.

This is not the equivalent of 13 new and largely similar American states forming a more perfect union. Europe’s nations have existed side by side for centuries, speaking different languages and developing distinct cultures. Their shared history mostly involves centuries of fighting wars against one another.

Many Europeans even object to the label “United States of Europe” as carrying the wrong connotations: a powerful central government and devotion to laissez-faire capitalism, American style.

Although the implied comparison is inevitable, what is actually evolving here is a much looser confederation of democratic nations built around Western Europe’s 12-nation European Community. For the EC, this is a landmark year; under the program dubbed “EC ‘92,” its member nations are supposed by the end of 1992 to have torn down most artificial barriers to commerce among themselves.

Europe has just set off down a long road. If it reaches the end, its national economies will be tightly integrated in a system of free markets tempered heavily by social welfare. A central authority will formulate foreign, social and environmental policies. The individual nations will retain authority over actually running things.

“A united Europe will not be based on the American principle of the melting pot,” says Peter Ludlow, director of the Center for European Policy Studies in Brussels. “It will be based on the principle of the diversity of nation-states.”

This Europe promises to become an increasingly strong economic competitor of the United States. More than that, it could pose a challenge--a healthy one, in many Europeans’ eyes--to America’s post-Cold War status as the globe’s dominant diplomatic power.

Speaking publicly, U.S. leaders welcome the prospect of a united Europe as a strong ally on the world scene. Privately, however, some express concerns about Europe’s challenge.

“It is evident that Americans will have much difficulty with Europe if unity succeeds,” says Jacques Delors, Europe’s leading unifier as president of the EC’s Executive Commission. In fact, Delors says, the United States should realize that a united Europe would provide it with a more powerful ally in crises such as last year’s Persian Gulf War.

The Skeptics Speak

Europe may never get that far. Especially on the American side of the Atlantic, many skeptics simply do not believe that Europe is ready to set aside centuries of hostility and embrace a common destiny. Britain and Greece sharing a common policy toward Turkey? Forget it. The same monetary policies for Germany and Portugal? Not a chance.

“The interests of national governments remain compelling,” says John Yochelson, a vice president of Washington’s Center for Strategic and International Studies. “There hasn’t been any real change in decision-making, just more cumbersome decision-making procedures.”

From the U.S. vantage point, Western Europe is swimming against the tide of history. Yugoslavia and the Soviet Union have disintegrated. Canada is shifting power from the national capital to the provinces. In the EC itself, Belgium and Spain are doing the same. In that global environment, how can the nations of Western Europe come together?

What’s more, unity seems to depend on prosperity. A European unity campaign in the early 1970s dissolved in intramural squabbling during the Arab oil shocks. Progress since the mid-1980s has depended upon steady economic growth. That can’t last forever--and when it stops, Eurounity may topple with it.

Even in Western Europe, where polls show large majorities in favor of ever-greater powers for the EC, some advocates of Eurounity are beginning to fear that the Continent is not up to the challenge.

“Where is a creative architect for the new Europe?” demands Norbert Walter, chief economist for Deutsche Bank, Germany’s biggest. “Where are the untiring men and women who are willing to roll up their sleeves and get on with building a bigger and better Europe?”

Walter laments that EC nations, preoccupied with their own problems, have failed to stop the civil war in Yugoslavia or to help the newly independent Soviet nations to their feet. “Jingoism and blinkered thinking,” he says, “are in danger of throwing away the chance of the epoch.”

The German Factor

The doubters point to two trouble spots--one within the EC, one outside.

On the inside it is not Britain, which has balked at much of the European agenda, that is causing the most serious concern. Continental Europeans expect Britain ultimately to hitch its wagon to unity, kicking and screaming all the way, rather than be left behind. The concern is focused instead on Germany, which has embraced unity in principle but struck out on its own when its national interests so dictated.

One of the great promises of Eurounity is binding Germany once and for all to the rest of Europe. But that country--since reunification the EC’s biggest member as well as its economically dominant one--rang alarm bells all over Europe in December with its unilateral decision to raise interest rates as part of its campaign against inflation.

Many of Germany’s neighbors were forced to follow suit, lest their currencies lose value against the German mark, even though higher rates could push their less-robust economies into recession. French Finance Minister Pierre Beregovoy, condemning Germany for its “egoism,” fumed: “If each country thinks first of itself, Europe will mark time.”

Germany remains undaunted. Chancellor Helmut Kohl has stepped up his campaigns to make German the EC’s third official language (English and French are the first two) and to make Frankfurt the home of the European Central Bank, which is to replace national central banks when the EC switches to a common currency late in the 1990s.

But even the German problem may prove nothing next to what is happening just to the Community’s east. No fewer than nine Eastern European nations, newly freed from the Soviet yoke, are pounding on the EC’s door. Nobody knows how many fragments from what used to be the Soviet Union and Yugoslavia will ultimately join the line.

Worries in the East

The EC cannot afford to barricade the gates. Two Europes--a prosperous West next to a desperate East--is a sure formula for strife. At the very least, Western Europe would find itself flooded with unwelcome immigrants seeking a life not available in the East.

But can the EC afford to open up? Already the wealthy countries of the EC are chafing under the strain of propping up the economies of its “poor four”--Ireland, Spain, Portugal and Greece. Only after a year of hard bargaining did the EC last year accept Poland, Czechoslovakia and Hungary as associate members, with greater (but far from full) access to EC agricultural, textile and steel markets.

Delors has no illusions that the road to unity will be smooth. “It will take a great deal of time,” he says, “and if history has some bad surprises in store for us, there could be a new period of stagnation in the construction of Europe.”

But to Delors, and apparently to the great majority of Europeans, standing still is not an option. The image of a Europe divided, on the brink of two world wars in the first half of the century, remains chillingly vivid. Delors says, simply and compellingly: “I don’t want to live in a Europe that is like it was in 1914.”

Delors is the first to admit that unity is easier in some areas than others. It is one thing to eliminate internal barriers to trade between EC nations. But it is quite another to ask nations to yield authority to a Pan-European government over monetary policy and foreign policy.

“We are facing 12 sovereign nations that have long traditions, that have geopolitical interests that are sometimes different, sometimes contrary,” he reminds. “Little by little, they have to learn to think in common and act in common. . . . Thanks to McDonald’s, you can have lunch in 10 minutes, but you can’t build a grand political system in a year.”

In Delors’ seven years at the helm, the EC has already come a long way. Founded in 1957 with only six members (Germany, France, Italy, the Netherlands, Belgium and Luxembourg), the EC was initially known in the United States as the “Common Market.”

It was a misnomer. Barriers such as tariffs and differing national product standards still stood in the way of the free movement of goods among the six EC members.

All that is beginning to change. Under the so-called Single European Act, which took effect in 1987 after adoption by the 12 national parliaments, the EC is more or less on course toward bringing down most barriers to the movement of goods, services, money and people across national boundaries by Jan. 1, 1993.

Delors coined the phrase “EC ‘92” to describe the movement toward a single market. That may have misrepresented the date, but it proved to be a public relations masterstroke.

Business had complained for years about costly customs inspections of goods shipped across EC borders, about varying national product standards that prohibited mass production of goods for the entire EC market, about national regulations that impeded the flow of capital from one EC country to another. The tantalizing prospect that all this would soon give way lit a fire under European (and foreign) businesses, some of which are expanding their European operations at a furious pace in anticipation of the single market.

Yet next Jan. 1 will mark only the beginning of Europe’s economic integration, not the end. In most of the cutting-edge industries--computers, electronics, telecommunications--European companies will still lag far behind their global rivals.

“The best we can hope for is to be moving toward becoming as competitive as the United States and Japan,” says Stanley Crossick, chairman of the Belmont European Policy Center, a Brussels think tank.

Money, Money, Money

More help may be just over the horizon. Two months ago, meeting in the Dutch town of Maastricht, the heads of the 12 EC countries agreed that the most prosperous among them--probably Germany, France and several others--will replace their national currencies with a common currency no later than 1999. As of now the common currency is called the ecu, an acronym for European Currency Unit. The French approve--an ecu was a gold coin in medieval France. But the Germans want to go back to the drawing board because ecu resembles German slang for cow.

“Surely there’s a better name,” Kohl says.

Except for Britain, whose Parliament retained the right to stay out of the currency union, European countries judged to have sufficiently sound budget policies and inflation rates will automatically jettison their currencies.

The economic consequences could be enormous. No longer would the Bundesbank set interest rates and govern the amount of money in circulation in Germany. Likewise for the central banks of other countries that switch to the ecu.

Instead, a European central bank (already dubbed the “Eurofed” after the U.S. Federal Reserve) would make monetary policy for all countries using the ecu. In practice, everyone expects Germany’s tight, anti-inflationary monetary policies to become the Eurofed’s own, much as many EC central banks already follow the Bundesbank’s lead.

Europe wastes $17 billion a year converting one EC currency to another, according to the European Round Table, whose members are the chief executives of 45 major companies.

“Japan has one currency,” the Round Table said in a recent report. “The U.S. has one currency. How can the Community live with 12?”

“Money,” the Round Table declared, “is the lifeblood of an economic system.”

It is more than that. It is also a central element of a nation’s ability to control its own destiny.

“Money is sovereignty,” says Dominique Moisi, deputy director of the French Institute for International Relations. “Monetary union will drag political union along with it.”

The Ultimate Union

That is the not-so-hidden agenda of the Eurounifiers. “Political union” is shorthand for a grab bag of powers--notably foreign policy, defense planning, immigration policy and regulation of working conditions--that proponents of Eurounity want to shift from the national governments to the EC.

“The agreement on political union (at the Maastricht summit) is slightly disappointing,” says Moisi, an avid Eurounionist. “It’s extremely vague. There was no substantial progress.”

In their most bizarre decision of all, the heads of government agreed that 11 nations (British Prime Minister John Major wanted no part of this) would develop and implement an EC “social charter”--that is, a declaration of worker rights ranging from a maximum 48-hour work week to advance consultations about plant closings. Even though Britain will not be affected by the social charter, its officials at the EC will apparently have a role in shaping it.

The European Community will be at the core of whatever pan-European government evolves. At 12 nations, the EC has become large enough to exert a gravitational pull on everything around it.

The seven nations of the European Free Trade Assn., which constitute virtually all the rest of Western Europe, have agreed to form a free-trade area with the EC as of next Jan. 1, when most of the EC single-market program will take effect.

The EC’s court, the European Court of Justice, has ruled the EC-EFTA accord invalid because it would set up overlapping jurisdictions between the EC court and a new court designed to rule on disputes between the EC and EFTA. If negotiators from the two camps can surmount that obstacle, the new “European Economic Area,” with about 377 million residents and economic production 30% greater than that of the United States, would be the world’s biggest economic bloc.

Already two EFTA nations, Austria and Sweden, have applied for outright EC membership, and most or all of EFTA could be folded into the EC before the end of the decade.

It’s one thing for the EC to welcome its Western European neighbors from EFTA, which as a group are even more prosperous than the EC 12. It will be quite another to open its arms to the likes of Poland and Albania and the debris from Yugoslavia and the European part of the Soviet Union.

Even the EC’s two poorest members, Portugal and Greece, are about twice as rich as the most prosperous of the new democracies of Eastern Europe.

More than that, Eastern Europe dwarfs the poor EC members in population. Portugal and Greece have about 10 million residents each; Eastern Europe (excluding all former Soviet republics except Lithuania, Latvia and Estonia, which have already begun preliminary discussions with the EC) is home to 132 million.

Many analysts believe Western Europe has been shortsighted and stingy in its dealings with Eastern Europe’s new regimes. The EC, says David C. Roche, managing director of the London-based investment house Morgan Stanley International, “is far too slow in opening its markets to manufactured products where Eastern Europe has a competitive advantage (steel, textiles, etc.).” And the agreements that make Poland, Czechoslovakia and Hungary associate EC members leave most EC quotas on farm imports in place.

Delors replies that EC purchases of East European goods have shot upward since the Berlin Wall fell in 1989. (Indeed, EC imports from Eastern Europe grew by 29% from the first half of 1990 to the first half of 1991, while U.S. purchases from Eastern Europe fell by 10%, according to the Organization for Economic Cooperation and Development.) Delors adds that Western Europe’s foreign aid far outpaces America’s.

“I am outraged when I hear it said that we are not doing our duty,” he says. “We are opening our frontiers and we are spending a lot. It is very dishonest to pretend the contrary, as is sometimes done across the Atlantic.”

He acknowledges that Western Europe could do more. “But this is a democracy,” he says. Western Europe is not about to throw large numbers of its own farmers out of work by importing vast quantities of food from the East.

Daunting though the obstacles to unity may be, Delors warns Americans not to underestimate their neighbors across the Atlantic. “Americans always are like amazed children when they look at what Europeans do,” he says.

If Europe can stay the course, it will fulfill the dreams of its post-World War II founders. It has been 30 years since an EC committee headed by French politician Jean Monnet declared:

“New bonds between peoples and the realization of their mutual solidarity are already beginning to take hold. As the Community’s impact gradually increases, these bonds will be strengthened. Then it will become possible to find the way towards establishing a political union and reaching the Community’s objectives: the United States of Europe.”