Bonn quick to eat words on Gatt deal

GERMANY withdrew its unexpected support for France yesterday, a day after Chancellor Helmut Kohl sent diplomats into a spin by backing France's objections in the deadlocked world trade negotiations.

Bonn's hurried rethink of its position will do little to improve Franco-German relations, which have been souring since German unification. They reached a low point at the beginning of this month when the European exchange rate mechanism all but fell apart, which Paris blamed on high German interest rates and Anglo-Saxon speculators.

After meeting Edouard Balladur, the French Prime Minister, in Bonn on Thursday, Mr Kohl went out of his way to cheer him up by publicly declaring that Bonn too had 'enormous problems' with the agricultural deal which the European Community thrashed out with the United States in the Blair House accord in Washington last November.

By yesterday afternoon the German-government spokesman, Norbert Schaefer, was busy retracting. 'The Chancellor did not speak of renegotiating this accord,' he said. 'It's not a question of new negotiations of Blair House but a question of how we deal with the difficulties that arise when the agreement comes into force.'

It was also announced that Peter Sutherland, the new head of the General Agreement on Tariffs and Trade (Gatt), would meet Mr Kohl and Mr Balladur within the next 10 days. Mr Sutherland is determined to get the trade deal signed by 15 December, despite its complexity and the gaps between the largest negotiators - the EC, Japan and the United States.

What Mr Balladur really wanted from his trip to Germany was a drop in the Bundesbank's interest rates to help ease credit in France and boost the economy. Mr Kohl was unable to deliver this and as a consolation prize Mr Balladur received a vaguely worded offer of support on France's other main pre-occupation: wringing further concessions for its militant farmers by renegotiating the Blair House deal, which they bitterly resent.

That agreement calls for steep cuts in EC farm subsidies, which would have greatest effect on France, the EC's largest agricultural exporter. Although agriculture makes up only 2.4 per cent of France's gross domestic product, the farm lobby has awesome power. It has strong links with the right in French politics and can cause serious problems for Mr Balladur.

Farmers are also capable of paralysing the country with huge demonstrations. Plans are already advanced for a blockade by up to 2 million farmers, shopkeepers, fishermen and other disgruntled workers on the eve of an EC meeting in September to discuss Gatt negotiations.