View from City Road: German-US deal may leave 12 angry states

Germany may insist it has not broken ranks with the EC in concluding a bilateral deal on telecommunications with the US, but its behaviour threatens to wreck the delicate Community consensus on trade policy.

The EC Commission has warned that Germany's decision not to impose EC sanctions against the US is illegal, but has fallen over backwards to give Bonn the benefit of the doubt. Confusion reigns. Neither the German ambassador to Brussels nor the Foreign Ministry had any idea that the economics minister, Gunter Rexrodt, had tackled US special representative Mickey Kantor on the fringes of the OECD meeting in Paris.

The Bonn defence is that the EC Utilities directive is worded so that Germany can indeed put the non-aggression clauses of its 1954 treaty with the US before its obligations under the directive.

The lawyers in Brussels and Bonn are still poring over the small print, but the question is clearly political as much as legal.

The Foreign Minister, Klaus Kinkel, who approved the EC decision to impose retaliatory sanctions against the US, is loath to criticise Mr Rexrodt too openly since they belong to the same party, the liberal Free Democrats (FDP). Indeed, he knows very well that it is not the first time the Economics Ministry has acted unilaterally.

Any delay in resolving the dispute will cost dear. The EC Commission is privately keen to believe it is all just a misunderstanding exploited by Mr Kantor to divide the EC partners all the better to rule them. But substantial damage to the Commission's claims to speak for the 12 has already been done.

The French government, whose nationalistic tub-thumping on agricultural trade has angered its EC partners, has been quick to condemn the apparent 'breach of Community solidarity'.

The most crucial impact may be on the Franco-German relationship. The ability of Germany to pull France into line, on which the EC has often depended, has been badly weakened. The row bodes ill for the difficult Gatt talks ahead.