Showdown with France June 13

Besides his troubles at home, German Chancellor Helmut Kohl confronts a new Socialist government in France that wants to change the deal to create a common European currency, the euro.

New French Prime Minister Lionel Jospin plans to emphasize economic growth and fighting joblessness, rather than fiscal austerity. His government has signaled the Germans with some tough new criteria for French participation in currency union, notes Paul Horne, the chief international economist at Smith Barney in Paris. The French are insisting that Italy and Spain be allowed in from the start - and Britain, too, if it wants to be.

This will be hard for Germany to swallow. Not only is Mr. Jospin apparently willing to abandon further efforts to reduce France's deficit, but the Italian government has dropped plans for economic reform in its latest budget.

This is galling to the Germans. But given their loss of credibility over their own attempt at revaluing their gold reserves, they can't do much about it. The "schoolmaster of Europe" has had to admit to poor grades himself.

Economist Horne will be among those eager to see the results of a Franco-German summit in Poitiers, France, June 13. Poitiers has been the place where the French have taken strong stands before. Under Charles Martel, they defeated the Moors there in AD 732 and stopped the Muslim invasion of Europe. In the early 1980s, it was where the French impounded Japanese VCRs until an agreement on import quotas was reached.

Now it could be the place where the French signal to the Germans, "Enough is enough!" on tight fiscal discipline. "The word may be, 'Let's go ahead,' even with a softer euro. Or they may call a halt" to currency union, Horne says.