By William Pfaff i International Herald Tribune 97-02-04

Back in the Difficult Present, Will the Euro Ever Materialize?

DAVOS, Switzerland - A year ago there was virtual unanimity in Western Europe on the inevitability of the common European currency.

Today this is no longer the case. Or to be exact, there no longer is confidence that the ''euro'' will arrive on time, on the terms now established, which are essentially those of the German central bank, the Bundesbank. However, if those terms are not accepted, will Germans themselves accept the euro?

A reasonable expectation is that there will indeed be a euro, but one under greater political influence than in the existing program.

This is what the French propose. However, the head of the Bundesbank, Hans Tietmeyer, says that ''the treaty is the treaty,'' and in an interview with the International Herald Tribune (Jan. 20) cited the statement of his predecessor, Karl-Otto Poehl, that an independent central bank is a crucial element in a single currency. It thus also is possible that the common currency's arrival will be postponed because of a scandalously belated recognition of the problems entailed in reconciling the positions defended by the two most important of the euro's founding members.

The positive scenarios for the currency are dramatic indeed: a powerful rival to the dollar in international commerce and finance, perhaps the successor to the dollar. Raw materials and energy, perhaps more, eventually denominated in euros. Boom in Europe because of reduced costs in doing transnational business, and the advantages of conducting external trade in a powerful common currency. New dynamism in Central European economies annexed to the expanding West European economy.

Getting from here to there, though, can no longer be seen in the simplistic terms common a year ago. The single market had been easily achieved; why not the single currency? The reasons are many.

''The serious discussion has only begun,'' a French economist, Jean-Jacques Rosa, wrote in the Figaro newspaper recently. ''The object of the debate is simply what no one until now has decided: What is this euro to be? A duplicate of the Deutsche mark, or a more flexibly managed money?''

The Bundesbank position is clear. It has to be an internationalized Deutsche mark, ''as strong or stronger'' than the mark. The German public, already doubtful about this new currency, will accept no less - or so we are told.

The problem lies in France, and to a lesser extent in the other countries not now in the Deutsche mark zone but eager to join the single currency. France's currency has been pegged to the mark since the 1980s, because France has wanted to make an international demonstration of the rigor of its economic management. It has unquestionably succeeded. But France also wants the euro managed in a way that pays attention to the real economy in the member states, and to growth and employment there.

This is a confrontation that until now everyone has pretended not to notice. Even now, with the problem out in the open, too many are choosing to respond with solutions that are currently unrealistic.

Mr. Rosa concludes his analysis by saying that the euro, like every other money in the world, has to be controlled by a single government.

A former member of the Council on Monetary Policy of the Banque de France, the French central bank, Jean Boissonnat, says the same thing.

''Without European economic government the euro is in danger of exploding. I am not sure that Europe's leaders realize the scale of the changes awaiting us.''

But everyone knows that between now and 1999, when the euro is to come into existence, no central European politico-economic authority is going to be created. Mr. Rosa proposes that the whole thing be delayed, while experts are put to work to think through how this European economic authority is going to be created.

One wonders, however, if experts are really going to solve the problem. It is not a technical problem; it has to do with the fundamental issue of sovereignty. A European economic authority separate from a political authority is hard to imagine. Yet a real government able to set Europe-wide budget and financial policies, and deal with the social consequences of certain budget decisions, is not in the cards. Least of all at a moment when the European Union says that it is about to expand eastward.

Yet if the problems surrounding the euro cause the common currency program to be postponed, will it ever happen? Good Europeans like to say that unification is like bicycling: if you don't keep going you fall over. But what if you have taken the wrong track and have run into a wall?