The Season of Discontent

Throughout Western Europe last week, returning vacationers by the millions clogged highways, jammed airports, and crowded into trains. The traditional month of summer holiday was at an end and a season of discontent was beginning. Across the Continent, shaky minority governments were the rule, national economies appeared in danger of spinning out of control, and even tradition-bound Englishmen were worrying whether democratic governments were capable of dealing with the severe problems that face Europe.

A feeling of helplessness and frustration was fueled by rising unemployment, a slump in economic growth, skyrocketing inflation and precarious governments. For example, the Cabinets ruling Belgium, Britain, France, West Germany and Portugal were all less than one year old. In Italy, Premier Mariano Rumor headed a chronically unstable coalition (the 37th since 1943). The Labor Party of British Prime Minister Harold Wilson held only 298 of Parliament's 631 seats. Portuguese President Antonio Spinola had no constitutional basis of power and held office at the pleasure of the group of young military officers who deposed the half-century-old dictatorship last spring. Belgium's coalition Cabinet was preoccupied by the linguistic differences that divide the country. West German Chancellor Helmut Schmidt's Social Democrats last month saw the party's popularity drop from 42% to 31%.

These weakened governments confronted Europe's most severe economic crisis of the past quarter-century. Consumer prices in Portugal were rising at an annual rate of 31%, in France 17%, Britain 23%, Italy 18%, and Belgium 17%. The quadrupled cost of crude oil, which Western Europe must import for most of its energy requirements, plunged the Continent's trade ledger deep into the red. Britain, France and Italy together were expected to run a $28 billion balance of trade deficit this year.

High interest rates were depriving many businesses of their capital needs; bankruptcies in West Germany were up 43% over last year, and in France 23%. Businessmen were logging fewer sales, and farmers were demonstrating to protest the squeeze between the higher costs of fertilizers and fuels and what they considered the low Common Market support prices. The fluctuations of the international monetary market and tight credit forced five banks in West Germany and one in Austria to close their doors, raising the specter of a 1930s avalanche of bank failures.

The situation in the major countries:

BRITAIN. Although the British are far from enthusiastic about going to the polls for a second time this year, Prime Minister Wilson this week is expected to call new parliamentary elections for early October to try to win a majority government. Recent polls indicate that no party will gain a majority, but Wilson's advisers see no advantage in delaying the balloting, especially since experts predict that Britain's economic situation will only get worse in the near future. Yet if another minority government is elected, it may not be able to impose the necessary stringent economic measures; hostility between Britain's classes could grow and create a political crisis. Trade Union Leader Hugh Scanlon has already warned that a vote against Labor is a "vote for industrial chaos this winter." Rightist groups led by retired military officers are organizing volunteers to keep essential services going if there are widespread strikes.

ITALY. The country is virtually broke. With a balance of trade deficit approaching $10 billion for this year and a $4.2 billion loan from the Common Market due on Sept. 18, the Italian government is running out of cash to pay its bills. Its unsecured lines of credit are so exhausted that wealthy West Germany granted it a six-month, $2 billion loan last week, but only if Premier Rumor pledged about one-fifth of his nation's gold bullion as collateral. News of the loan came amid the ever increasing cost of living (Rome's food prices were up 20% in August), shortages of pasta and sugar, poor harvests and mounting business failures. Tens of thousands of Italian workers have lost their jobs in France, West Germany and Switzerland and are returning home, swelling the ranks of Italy's unemployed.

FRANCE. The government is trying to ease the psychological burden of inflation by demonstrating that not all prices are rising. Under a program optimistically called "Operation Price

Brake," about one-third of France's 700,000 shopkeepers last week voluntarily reduced prices by 5% on school supplies, children's clothing, ham, yogurt, sausage and other common goods. No one expects the widely publicized program to have anything but a cosmetic effect on France's severe economic difficulties. A more fundamental attack on inflation was launched several months ago when President Valery Giscard d'Estaing restricted credit by imposing high interest rates. Recognizing the hardship the measure inflicted on most Frenchmen, Giscard has urged his countrymen: "Do not give in to discouragement." Nonetheless, forecasts indicate that this winter widespread strikes and business failures could sweep France.

WEST GERMANY. With its 7% inflation and 2.2% unemployment, the country continues to be economically the healthiest in Western Europe. But its economic vigor now depends almost entirely upon its enormous balance of trade surplus ($11.7 billion through July). There is every indication that the foreign customers of German-made goods are planning to cut back their purchases in order to trim their own trade deficits. A top West German finance official privately warns that by the end of the year West Germany could start running its own balance of trade deficit. This would create serious political problems for Chancellor Schmidt and his Social Democratic Party. Schmidt is also bedeviled by two nagging scandals: 1) the suspension last week of Karl Wienand from his powerful post as S.P.D. whip because of charges of tax evasion and lying to an investigative committee, and 2) the fact that Confessed East German Spy Guenter Guillaume could rise to become one of then Chancellor Willy Brandt's three personal assistants before he was caught last April (TIME, May 6).

Consumed by their domestic problems, Western Europe's governments are hardly in a position to launch a bold, coordinated attack on their common enemy, the economic crisis. Yet these governments recognize that that is just what is needed. Chancellor Schmidt has already urged daily consultation among the West's major economic powers to mesh policy. President Giscard has called for a summit of the Common Market nations' leaders. If solutions do not emerge soon, Europe could be on its way either to astronomical inflation or mass business failures and double-digit unemployment. These conditions, if allowed to fester, could eventually produce massive disillusionment with Europe's seemingly powerless democratic institutions. The specter of such disillusion makes many Europeans edgy. For widespread despair would no doubt encourage the demagogues of the extreme right and left, as it did in the 1930s, to try to impose their own kind of repressive solutions.

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