The historic accords on monetary and political union were in the bag, and the champagne was open and ready to pour. After 2 1/2 days of intense dickering that stretched into the wee hours of Dec. 11, the European Community's 12 government leaders were ready to toast their achievements. Then an EC aide popped up with a heart-stopper. The leaders, he proclaimed, had "forgotten something." But when that something turned out to be nothing more than a minor procedural point, the conference room dissolved into relieved laughter and lifted glasses. Proclaimed French President Francois Mitterrand: "We have created a European union."

Europe's economy may be in the doldrums, but from Scotland to Sicily, Europeans have every right to be in a celebratory mood. Finally putting two years of harsh debate to rest, the EC leaders who met in the Dutch town of Maastricht launched a monetary union that will give Europe its own currency and central bank by the end of the century.

Like its precursor, the 1986 Single European Act that paved the way for free trade within the EC after 1992, the accord promises to become a powerful force for even closer economic and political integration. With the EC boasting 340 million consumers and a gross national product of $8.5 trillion, the new European currency unit, or ECU, has the potential to become a strong rival to the dollar in international finance and trade.

POUND DRAG. But turning the monetary deal into reality will be as difficult as putting 1992 into motion. Denmark, for example, still has to submit the currency plan to a nationwide referendum, and British Prime Minister John Major won the option of keeping the pound out of the union altogether. But time and again, says Dutch Prime Minister Ruud Lubbers, EC history shows that laggards "in the final analysis follow." A single currency, he added, "is now a fact of life."

The EC already has a monetary system, of course, with members' currencies closely linked to the mark. An ECU also exists, but its name appears on no bank notes. A composite of European currencies worth about $1.28, it's used solely for settling international accounts. Now, a new European Central Bank, blending the decentralized character of the U. S. Federal Reserve and the anti-inflation determination of Germany's Bundesbank, could be issuing real ECUs by 1997. That will irreversibly change the way everyonefrom manufacturers to pension fund managers and stockbrokers-does business.

In fact, now that the EC has decided to mint its own money, the rush to adapt to it is already beginning. No industry will be more affected than banking. Analysts see a new wave of consolidations, mergers, and intra-European tieups hitting banks, especially once the final composition of the ECU is determined in 1994. Anticipating that, Barclays PLC has been expanding on the Continent for a year already, buying private banks in Germany and France to gain corporate clients and local money-management knowhow. "Monetary union is going to have a very profound influence," says Paris-based analyst R. Scott Bugie of Standard & Poor's Corp.

In one fell swoop, banks will find it easier to compete across borders as the home-team advantage of national currencies disappears. And major companies will be able to use two or three banks to handle European business, instead of the half-dozen or more many use now. As competition intensifies, revenues in one key area -- foreign-exchange trading -- will shrink as a welter of currencies becomes one. Belgium's Generale Bank figures this alone will cost it up to 5% of its $71 billion annual revenues. "It is a challenge," concedes Ellen Schneider-Lenne, Deutsche Bank's board member for international finance. "But we see it more as an opportunity."

Some banks are already thinking ECU. Paribas Capital Markets, the London-based Euromarket trading arm of the big French bank, has switched its internal accounting to ECUs from dollars. But the biggest battle of all will come as banks begin launching products designed for the ECU era. Those that have already are finding success. Turin's Istituto Bancario San Paolo, which operates in France, Spain, and Italy, already writes a third of its Italian mortgages in ECUs and expects that share to jump to 70% within two years.

SEA CHANGE. Other hints of what's ahead can be found in the stock market, where a single "Eurotrack" index already follows the ups and downs of the top 200 equities trading on several bourses. But the likelihood of one stock market for all Europe will draw closer once managers of the trillions locked up in European pension funds begin switching their accounts and investment strategies to ECUs. "Just think," marvels San Paolo Executive Vice-President Alfonso Jozzi. "It'll be a whole new game."

The European bond market will undergo a similar sea change. Although the ECU bond issuance already is growing at 46% a year (chart), the market remains puny alongside the world's leader, the $6 trillion one in U. S. Treasury bonds. But after EC members' government debts are switched over to ECUs, a new market will come alive. Bob Tyley, a Paribas Capital Markets bond expert, estimates the new market will be worth a staggering $3.5 trillion, relegating Japan's $2.5 trillion bond market to third place.

A single currency will mean huge changes for manufacturers, too. Mergers may become easier: British conglomerate BTR PLC, for one, thinks a vibrant ECU market will make it easier to finance acquisitions in Germany and Belgium. And costs will shrink. European businesses figure they will save $15 billion a year on foreign exchange commissions and currency hedging costs. Britain's Imperial Chemical Industries PLC estimates that it alone will save $100 million a year, the equivalent of 1% of its annual European sales. "We see only advantages," says Yves Blanc, finance director of French auto-parts maker Valeo.

As the EC steps up the pressure for open competition across Europe, more customers are starting to comparison-shop for the same products between countries. The present tangle of currencies hides often substantial price differences on everything from autos to computers. ECU price tags would quickly change all that. Indeed, Europe's political leaders will be pushing these and other potential benefits to business and consumers as they promote the Maastricht pact in coming weeks. But they will be less forthcoming about the substantial adjustment pains necessary to make the ECU work. Warns Paribas' Tyley: "The ECU is a clone of the Deutschemark with inflation as its No. 1 focus."

TOUGH RULES. From early 1994, when the countdown to a single currency begins, Europe's policymakers will have to confront a slew of tough economic hurdles. They will need to reduce their inflation rates to no more than 1.5 percentage points above the lowest three members of the EC. Budget deficits will have to be pared to a maximum of 3% of gross domestic product, a target that even anti-inflation Germany, at 5%, now cannot meet. Government debt will have to be pared, too. In fact, Italy and Belgium risk disqualification if they cannot meet this criterion. Staying out of the ECU system could boost Italian interest rates a full percentage point, estimates Daniel Gros, a monetary expert at Brussels' Center for European Policy Studies.

Even thornier obstacles lie ahead. Poorer EC members, including Ireland and Spain, will require substantial financial aid to bring them alongside their richer cousins. The currency could also make it harder for many nonmembers, from Sweden to Turkey and the emerging economies of Eastern Europe, to join the EC. But just as their predecessors did when they got the free-trade bandwagon going, the Maastricht summitteers chose to look beyond such problems. In the end, they figure, they have little choice but to make the ECU work.

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