Europe Urged to Spend $75 Billion on Public Works : Economy: EC finance ministers meet to debate farm trade and money market uncertainties.

With Western Europe’s economies facing an increasingly uncertain future, finance ministers of the 12 European Community nations were asked Monday to spend as much as $75 billion on public works projects.

Jacques Delors, president of the EC’s executive commission, said he told the finance ministers that Europe faces an economic crisis and needs to take serious medicine. “If you put a patch on a wooden leg,” he said, “you don’t bring it back to life.”

The finance ministers met at the EC’s Brussels headquarters as Europe tried to cope with two more immediate economic issues: agricultural trade and continued uncertainty on Western European currency markets.

French farmers, protesting last week’s trade agreement between the EC and the United States, forced the closing of a Coca-Cola plant in a Paris suburb for about three hours. The French government, as part of an apparent strategy to delay final approval of a trade package until after next March’s elections, kept open the possibility that it would veto the agricultural trade accord.

That did not stop Arthur Dunkel, director general of the General Agreement on Tariffs and Trade, which supervises the world’s trading system, from calling negotiators from 108 nations to Geneva on Thursday. Dunkel hopes the U.S.-EC farm agreement will enable the negotiators to conclude six years of talks aimed at liberalizing the rules governing world trade.

Meanwhile, the weekend’s agreement by EC finance and central bank officials to devalue the Spanish and Portuguese currencies brought at least a small measure of calm to Europe’s tumultuous international currency markets.

But Spain raised interest rates to try to head off a further devaluation. Ireland and Sweden also raised rates to defend their battered currencies; Norway raised them to a breathtaking 1,000% annual rate for some overnight loans.

Europe’s economic predicament was reflected in new data published by the EC showing that industrial production in the 12 EC countries fell by 1.2% last summer. Only Denmark reported a significant increase of 2.5%. The big losers included Germany (minus 1.5%) and Italy (minus 2.3%).

The Continent’s sagging economies will be high on the agenda when EC heads of government meet in Edinburgh next month. Just as President-elect Bill Clinton is planning to propose massive public works spending to pump up the moribund American economy, so will the European leaders consider hefty infusions of money for railroads, highways and other infrastructure.

Henning Christophersen, EC economics commissioner, proposed $62 billion to $75 billion in public works spending. About 10% would come from the European Investment Bank, the EC’s institution for financing capital investment; 10% more would be borrowed from private banks.

The rest would have to come from governments of EC member nations, many of which are already running huge budget deficits and do not want to spend more. “This is not the time for deficit-financed economic programs,” said Horst Koehler, Germany’s secretary of state for finance.

The money would be used not only to finance public works projects but also to prop up ailing small- and medium-sized businesses. “If we are coordinating that, we will get a much better result” than if each nation goes its own way, Christophersen said.

Also in Brussels, British Prime Minister John Major met with Belgian Prime Minister Jean-Luc Dehaene at the beginning of a round of visits to the leaders of the other 11 EC countries to talk up the need for economic stimulus. Britain has opposed such measures in the past. But this year, Major, who will be the host of next month’s Edinburgh summit, is looking for an initiative at a time when the British economy is the sickest in the EC.

Far from the ornate meeting halls of Brussels, about 300 French farmers burned tires and wood in front of a Coca-Cola plant in Grigny, south of Paris, forcing the plant’s temporary closing.

Farmers all over France, the EC’s biggest agriculture producer, are protesting last Friday’s trade agreement with the United States, which calls on the EC to reduce the volume of farm exports receiving government subsidies by 21%.

The farmers promise widespread demonstrations Wednesday, when the French Parliament is to debate the trade accord. French Agriculture Minister Jean-Pierre Soisson said his government will ask for a special meeting of EC foreign and farm ministers, probably next week, to discuss the agreement.

Prime Minister Pierre Beregovoy said Sunday that France would not accept the farm deal and held open the possibility that France might veto it within the EC.

But in Geneva, world trade leaders hope the U.S.-EC accord will finally break the logjam that has blocked the six-year-old Uruguay Round of international negotiations aimed at liberalizing trade in agriculture and many other economic sectors.

“This should lead to a package of results acceptable, and of benefit, to all the participants,” said Dunkel, the head of the General Agreement on Tariffs and Trade, as he summoned negotiators.

Europe’s other economic crisis, over the tattered system of fixed exchange rates between many of its national currencies, simmered Monday but did not boil over.

Despite devaluing their currencies over the weekend, the Spanish and Portuguese governments had to take measures Monday to prevent further erosion. Spain raised interest rates in an effort to attract investments in securities with denominations in Spanish pesetas; Portugal bought Portuguese escudos on international currency markets.

Elsewhere in the EC, Ireland suspended its government short-term lending facility, which had been charging 13.75% in interest, and instead established money market rates of 30%.

Ireland is determined to avoid a devaluation, even though the recent collapse of the British pound has, in effect, made Irish imports nearly 20% more expensive in neighboring Britain.