10/6/99

Kathleen O'Toole, News Service (650) 725-1939; e-mail: kathleen.otoole@stanford.edu

Europe needs united military, former EC official says

Europe has more soldiers than the United States but doesn't get its money's worth because they aren't united into a single military force, Horst G. Krenzler, one of the early architects of the European Union, told a gathering of Stanford scholars on Wednesday, Sept. 29. The Kosovo crisis, he said, has underscored the technological gap between European forces and the U.S. military, especially in transportation, intelligence and modern weapons technology. "We initially sought to handle [the Kosovo crisis] alone, but only the United States and NATO could guarantee a credible military threat."

Speaking to a lunchtime meeting of Stanford's European Forum, Krenzler, the director general of external relations for the European Commission from 1987 to 1996, said that savings from uniting military operations would help Europe finance military modernization. Now that Britain's prime minister no longer objects to establishing a common foreign and security policy, NATO Secretary General Javier Solana has been named to head the effort, and Europe's "defense ministers and budget ministers have to put their money where their mouth is." The United States shouldn't oppose it, Krenzler said, because it also wants more alternatives for handling regional crises in Europe.

A German native trained in law and economics who is currently a university lecturer, Krenzler also presented a rosy inside-Brussels economic picture of today's EU and outlined significant political and financial challenges ahead, including bringing Eastern Europe into the union.

The January 1999 introduction of a common currency in 11 of 15 EU countries created a market of 290 million consumers and an independent central bank that will make Europe a more competitive and self-contained economy, he said. A flourish of mergers has begun as businesses attempt to take advantage of the larger markets created by the elimination of tariffs and exchange rate uncertainty.

"The Euro's rise will transform an international monetary system that has been dominated by the dollar since World War II into a bipolar regime," he said. The United Kingdom, Sweden and Denmark will join the monetary union in one or two years, he predicted. UK Prime Minister Tony Blair may have reversed his country's previous stand against building an EU security program, he said, as a means of keeping Britain involved in EU decision making until UK voters are ready to vote for monetary union.

Krenzler's rosy economic scenario was challenged by a few students and professors who questioned the union's ability to handle economic recessions and to maintain good trade relations with the United States. While a Portuguese consumer now can buy a German product without paying tariffs and converting currency, another worry, they said, is that a deep recession in one industrial sector will disproportionately affect EU countries. Josef Joffe, the Payne Distinguished Lecturer this year at the Institute for International Studies, suggested that Europeans will not allow workers to relocate as easily as in the United States. During the U.S. auto recession of the 1970s, he said, large numbers of laid-off Midwesterners moved to jobs in the South. "Nobody in Dallas was marching with posters saying 'out with Michigan-ers,'" he said.

Krenzler's answer was that Europeans do move for jobs now and that such "asymmetric shocks" will be reduced as industries become more integrated across national borders. "The financial markets are starting now to integrate. After three or four years, we won't have asymmetric shocks."

Joffe, who is a German foreign affairs journalist, also predicted serious trade problems between the United States and Europe over "protectionist policies posing as health concerns." He was referring to EU regulations requiring labeling of hormone-treated meat and policies restricting genetically engineered agricultural products. Krenzler said Americans and Europeans "make different risk assessments." He defended the EU policies on scientific grounds but conceded such concerns also could be exploited by industrial sectors seeking to reduce foreign competition.

Timothy Josling, professor of food research and director of the Stanford European Forum, a program of the Institute for International Studies, suggested the Transatlantic Economic Partnership, which Krenzler helped to bring into existence in 1995, needs to start tackling such issues. Northern and Southern Europeans also don't agree on the food-related trade issues, he said.

Krenzler detailed what he said was the long and difficult process of expanding the EU east until it encompasses 27 countries and 500 million people. Europeans see no alternative means for achieving economic and political stability than incorporating former Communist Europe, he said. "The policy of enlargement is the best remedy against the risk of age-old nationalist and ethnic conflicts."

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By Kathleen O'Toole