Twelve face grim economic future

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The Independent Online
'UNLESS some things are resolved quickly, we will be heading off into the unknown,' an EC official said yesterday, warning that with just a month to go before the grand opening of the Single Market on 1 January, many crucial planks underpinning its successful operation are still missing.

A free market in goods, peoples and services is the crowning achievement of some seven years' hard graft - the inspiration for monetary and hence political union. It is hoped its establishment will bolster the European economy and boost growth.

But yesterday's warning came as Henning Christophersen, the economics commissioner, said EC growth would be barely 1 per cent this year and between 1 per cent and 1.5 per cent next year. Unemployment is unlikely to drop below 11 per cent before 1996.

Only 79 per cent of the Single Market programme has been written on to national statute books. And the areas causing most trouble are those that are potentially the greatest block to the free movement of goods. A compromise on the harmonisation of VAT rates, for example, has only been implemented by six of the 12 members, which implies a period of chaotic transition for Euro- trading businesses. The problem of whether or not passports must be shown at EC frontiers is unresolved. Many technical standards have still to be harmonised and there is no agreement on various banking and insurance rules.

Denmark and France have been the most enthusiastic about converting the necessary measures into law, with Britain (once star of the class) now, according to EC sources, bottom of the Community league table.

The Commission has created a 'crisis unit' which will swing into action if serious problems persist. There are only limited measures, however, that can be taken against recalcitrant members. They may be brought before the European Court of Justice by the Commission or another member state for non-compliance with Community law, or by individuals claiming personal damages.

Community officials suggested yesterday that the greatest sanction will be the pressure industries will put on national governments once they find they cannot export competitively.

Mr Christophersen yesterday criticised member states for negative thinking. Every European country had looked for improvement in neighbouring economies to heave it out of recession, he said, instead of pulling together.

The Commission is devising a growth strategy, to be presented at the Edinburgh summit, that combines use of existing funds and new money in the shape of a European Investment Fund worth 5bn ecus. Mr Christophersen admitted the future looks bleak: 'I do not expect any member state to be in a position to boost spending or increase their deficits.' He said the immediate aim of any growth plan must be to boost investor confidence.