David P. Calleo

What are the challenges facing the European Union with the end of the Cold War ? Will the Union be able to meet them ? What links should it maintain with the United States ? What type of relations should be established with Russia ? 
The stakes are high: nothing less than international stability and world harmony in the next century. The challenges are of various kinds encompassing political, security, economic and institutional issues. In the first part of this study, the author analyses these challenges and argues for a European approach rid of the more unrealistic federalist ideas. In a second section he examines those states that will play major roles in Europe's future: Germany and France, within the EU, and, outside it, Russia and the United States. In doing so he attempts to evaluate Europe's ability to rise to the occasion.

The author first claims the right to criticize the monetary aspects of the Maastricht agreement without being accused of anti-european nationalism. He wonders whether European construction will be undertaken in such a way as to preserve the synthesis of economic efficiency and social solidarity which has for so long distinguished Western Europe from other parts of the world. After having examined the underlying logic of present policies designed to maintain the twofold objective of monetary stability and competitive deflation, the paper analyses the negative effects of this strategy. It shows that European construction can not be expected to automatically enable a convergence in the member countries' economies for, paradoxically, the contrary, i.e. divergence, is more likely. Having suggested that the Community will be unable to get by without a variety of economic policies, the paper examines the choice available if the twin goals of economic efficiency and social well-being are to be pursued. This choice is, to either speed up the movement towards a single currency coupled with the strengthening of national budgetary policies, or to envisage another kind of process for European construction with preference given to the development of a parallel currency.