Regional Outlook : European Unity Is Losing Vigor : The dream survives but the timetable slows.

Fabienne de Kimpe is part of the new Europe.

As a counselor at one of 200 information centers scattered across the European Union’s 12 member countries, she advises business people on how to get around in the union’s vast new single market, which became a reality early last year.

In her modern, ground-floor office, under a poster of a hang glider soaring effortlessly through a sunlit sky over the word Europe, De Kimpe helps her clients come to grips with an array of difficulties, ranging from tax questions and union standards to finding partners in the outer reaches of their expanded business world.

“It takes time for the awareness of these new horizons to develop, but it’s coming,” she said. “What’s lacking now is a single currency. Only then will we have a really unified market.”

While the idea of a single European currency makes sense to De Kimpe and leaders of the EU states who nearly three years ago agreed to form a monetary union by the end of the century, there is no longer any certainty that it will be accomplished.

Other lofty goals--including the full economic and political union that the 12 leaders also set down at their historic December, 1991, summit at Maastricht, the Netherlands--have grown fuzzy and uncertain, while talk of a confident, centralized union by the end of the century has all but ceased.

The underlying reason for all this is not hard to find: Europe’s leaders have quite simply lost their way. After they defied skeptics by meeting a self-imposed 1992 deadline for creating a single market without tariffs, and after they committed themselves in 1991 to political and economic unification by the end of the century, their drive toward greater European unity has faltered.

Many believe that, for the union to regain its direction and its confidence, it must successfully deal with two major challenges: combatting unemployment and bridging Europe’s former East-West divide by reaching out to the Continent’s new, post-Communist democracies.

“If we get either of these wrong, we’re all in deep trouble,” said Stanley Crossick, chairman of the Belmont European Policy Center, a Brussels-based think tank.

Nevertheless, the achievements so far have been considerable. The union’s member nations constitute the world’s largest and richest consumer market. Goods, capital and people move more freely than ever on a continent that twice in this century has been racked by nationalistic wars.

This new freedom has been a major factor in the prosperity that today separates the EU West from the tumbled communism in the East. As the fathers of European unity predicted a generation ago, this economic interdependence has virtually eliminated the possibility of armed conflict among member states.

Much Uncertainty

But uncertainty clouds the way forward. Among senior policy-makers, debates rage on issues such as whether the union must reform and strengthen its creaking institutions before it can even consider the task of expanding its membership across the old East-West divide.

Meanwhile, a new, distinctly nationalist government has taken over in Italy; German Chancellor Helmut Kohl for the first time has begun complaining openly about his country’s high contributions to the EU treasury, and Britain’s increasingly beleaguered Prime Minister John Major views attacks on Brussels as one of the few ways he can score political points at home.

Hopes for a monetary union, which seemed to perish amid last year’s European monetary crisis, have once again begun to rise, but that goal too remains elusive. Western Europe’s deepest, most prolonged recession since World War II has only added to a sense of disarray.

In the four decades since their idea first began to take root, the promoters of European unity have survived several troughs of doubt during previous economic downturns. But what makes this crisis unique and more worrisome is that this time the recession is a sideshow.

Today, it is impotence in the face of troubling new problems that really gnaws at Europe’s confidence and saps its will.

“Apathy, confusion and frustration have settled like mildew over the Continent,” commented Werner Weidenfeld, a respected Mainz University political scientist, in an article last month in the German daily Die Welt. “What, as an idea, lifted the fantasies of generations, is, as a real political system of a united Europe, becoming the focus of whiny accusations.”

Said Andre Sapir, head of the Brussels-based Institute of European Studies, “People have gotten a bit lost on what Europe is about.”

For the new democracies of Central Europe, whose 1989 anti-Communist revolutions were in large part driven by a yearning to become part of Western Europe’s rich, free-market democratic experience, the EU’s loss of direction is especially disturbing.

Suddenly, one of the great prizes of their success has shrunk.

For the United States too, the EU’s present malaise is critically important.

For amid all that has transpired since the end of World War II, the union is the only institution that offers the Continent a real chance to achieve a new level of political unity and thus escape a past littered with wars of national aggression--wars that in this century alone have cost the lives of more than 60 million Europeans and nearly a third of a million Americans.

Indeed, beyond the visible crises--the war in the former Yugoslav federation, simmering instability and ethnic conflict in the East, political corruption in the West--it is the less obvious struggle between advocates of deeper European unity and the forces of nationalism that is likely to have a far greater bearing on Europe’s fate in the 21st Century.

Recent events--including a series of direct challenges by member countries to the EU Commission’s authority, and last month’s choice of Luxembourg Premier Jacques Santer, a weak, uninspiring figure, to succeed the dynamic Frenchman Jacques Delors as EU Commission president--are indicators that the flow is running against greater integration.

June’s lowest-ever voter turnout for a European Parliament election, and the fact that the campaigns were dominated by local issues rather than the grand ideas of the future shape of Europe, underscored a broad public apathy on the fundamental questions of “Why Europe?” and “What kind of Europe?”

And as electorates have turned inward, demanding action on jobs, crime, corruption and immigration, uncertain decision-makers retreat with them.

The Jobless Problem

While unemployment would seem to be linked directly to the recession, in Europe it is not. As Germany and the region’s other major economies show signs of resuming modest growth, there is little expectation that the problem will go away.

The high cost of doing business in Western Europe, mainly due to liberal social benefits and universal medical care, is driving investment out of the region. At the same time, legal protection for employee job security discourages employers from any quick additions to their work forces.

An example of the problem sits on Sapir’s desk: The laptop computer was made in Japan and purchased in the United States at half the Brussels list price.

“Europe’s central problem is the welfare state,” former French Foreign Minister Jean Francois-Poncet told a symposium in Prague, the Czech Republic, last month.

But in societies riven with age-old divisions yet so close that it is possible to drive through four countries in less than a day, state benefits are considered an essential ingredient for social peace.

“This is not the United States, and it is not Japan,” Sapir insisted. “Without this social contract, we wouldn’t have had the peace and prosperity we’ve enjoyed.”

While a growing number of economists like Sapir now acknowledge that Europe needs what he terms “a better balance between worker incentive and protection,” politicians--already unpopular as a class--view any large cut in benefits as potential political suicide.

The second challenge--how to embrace the new democracies to the East--is equally problematic.

While EU leaders know their union can survive only by erasing the old East-West divide and eventually accepting the former Soviet satellite states as members, the price is enormous.

By one estimate, it would cost $70 billion annually just to extend the union’s agricultural subsidies and regional assistance programs to the four most advanced Eastern countries: Hungary, Poland, Slovakia and the Czech Republic.

How, officials ask, can the EU afford to integrate nations whose average per capita incomes vary between one-sixth (Romania) and one-half (Hungary) that of Portugal, the poorest member?

Such a transfer of payments could seriously undermine Western stability, senior officials maintain. While nations like Germany, Denmark and Britain see potential political and economic benefits in moving east, France and the poorer southern countries see new Eastern members as competitors in the battle for aid to depressed regions.

Others, however, pointing to the potential for political instability in the East, ask how the EU can afford not to take in these countries.

So far, little has been done.

Association agreements have been signed and trade liberalized, but strict limits on prime Eastern exports--including textiles, steel and farm products--have prevented any economic windfall for the new Eastern democracies.

Meanwhile, some Eastern leaders chafe at EU’s promptings to improve wages and labor standards. “To force us to accept these externally imposed standards means to push us out of work,” an angry Czech Prime Minister Vaclav Klaus warned earlier this year.

The lack of a blueprint for addressing these issues has diminished the union’s standing and accentuated its impotence in dealing with other problems. The result has been a decline in public approval.

“ ‘Europe’ is perilously close to becoming a term of abuse throughout the European Union,” commented the Economist last spring.

In some ways, the avalanche of problems that has descended since the Maastricht Treaty was signed has caught the union at an exceptionally vulnerable time. The treaty’s sweeping call for economic, monetary and political union was a hasty reaction to the series of unexpected events that ended with German reunification.

For both French President Francois Mitterrand and German Chancellor Kohl, the treaty was nothing less than a guarantee that Germany would never again pursue its interests in isolation. But the political and economic commitments ran far ahead of public acceptance.

The fact that the treaty was poorly prepared by a leadership distracted by the mushrooming war in the former Yugoslav federation only exacerbated the problem. Many view the June, 1992, Danish rejection of the treaty as a watershed. Even though the Danes endorsed the treaty last year in a second referendum, the effect of the initial rejection lingered.

One survey earlier this year showed 60% of European voters either undecided or against the treaty, and today even Delors himself believes it was a bad idea.

“We shouldn’t have concluded a treaty on political union,” he said recently. “It was too soon.”

Pushing Forward

But despite these problems, the collective will is to push forward. Most of the public still believes the union is “a good thing.”

Political leaders also need little reminding that the overriding reason behind the union’s existence remains as valid today as it did 30 years ago: reining in an oversized Germany.

“We need an organized Europe to escape German domination,” former French President Valery Giscard d’Estaing said.

In June, Austrians gave a boost to advocates of greater integration when they voted by an unexpectedly large majority to join the union Jan 1. “Yes” votes in similar referendums planned for Sweden, Finland and Norway this year would do much to recapture lost momentum. Favorable votes would bring the three Scandinavian countries and Austria into a union that already includes Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain and Britain.

Many predict that the decisive battles will come in 1996, when member states convene to review the terms of the Maastricht Treaty. Advocates of a tighter European unity, known as “integrationists,” will oppose “intergovernmentalists”--those who see the future more in the form of cooperation between national governments.

With as many as 16 of the Continent’s richest, most powerful countries discussing issues such as common foreign and security policies and the role of national parliaments in unionwide subjects, the conference will amount to a de facto European constitutional convention.

With national leaderships generally weak and insecure, some analysts believe that whichever side manages to better mobilize public opinion is likely to win the day.

“I don’t think leaders will go much beyond what they perceive public opinion to be,” said Crossick of the Belmont European Policy Center, a professed integrationist. “The real test is whether the integrationists can master the communications.

“It’s all to play for.”

Faltering Support

A poll among citizens of EU countries has shown a wavering of support for European Union membership in recent years.

1994: 56%