European Community

European Community governments battled their way out of crisis Tuesday with a hard-won compromise on a U.S.-EC farm deal seen as key to a global trade settlement, but the bloc's trade woes are far from over. U.S. Trade Representative Mickey Kantor flatly refused to renegotiate the so-called Blair House accord at the heart of the dispute. France, with equal firmness, rejected the U.S.-EC agreement on cutting farm subsidies.

France demanded Monday that the European Community and the United States rewrite a farm subsidy agreement considered vital to concluding world trade talks. France's hard-line position risked creating a deep rift among its EC partners. Most have opposed altering the transatlantic deal. British Foreign Secretary Douglas Hurd warned that reopening the accord could endanger the 116-nation Uruguay Round negotiations, which are designed to drop global barriers to trade.

When senior European officials gather today in Brussels, a resolution of one of international commerce's most intransigent problems will be hanging in the balance--and with it one of the best hopes for healing faltering economies from Pasadena to Paraguay.

In a harshly worded warning to Europe's political leaders, the world's top trade official said Wednesday that bickering over farm subsidies in the European Community threatens to undermine talks for a worldwide trade accord. Peter Sutherland, director general of the General Agreement on Tariffs and Trade, said complaints about the "Blair House agreement" on subsidized European farm exports "continues to bedevil" negotiations as the deadline for a global accord nears.

"This is an olive grove, Italian style," says European Community fraud-buster Alfredo Bizzarri as he surveys 20 acres of mostly plowed-up earth in the rolling farmland between Rome and Florence. In the late 1980s, farmer Giuseppe Lelli claimed thousands of dollars a year in EC farm subsidies for more than 1,000 olive trees on these fields. Investigators, suspicious because the local olive oil mill was not turning out much oil, paid a visit to Lelli's farm.

It has been, well, to put it mildly, rather embarrassing. First, there was the flap over plans by European Community bureaucrats to regulate, of all things, the noise of lawn mowers. Then the French nearly took to the streets at the thought of limits on bacteria in their cheese. Britons were offended by a possible ban on their favorite pub munchies, prawn cocktail-flavored potato chips. Danes were furious when told their dainty Ingrid Marie apples were too small, but finally gave in.

The issue sounded tame enough: whether the European Community should erect barriers to banana imports. But when the EC legislative body grappled with it one cold day last February, the meeting stretched into the wee hours of the morning and tempers flared out of control. The British screamed at the Dutch. The Germans denounced the British. The British threatened the Danes.

France trimmed a short-term interest rate Monday, the first sign that last week's loosening of Europe's exchange rate system could lead the Continent's recession-plagued nations to stimulate their economies. However, the cut was immediately followed by a weakening of the French franc against the German mark--which could forestall additional rate cuts. The Bank of France said it was cutting its rate for 24-hour loans to banks to 9.75%, from 10%.