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FRENCH NUCLEAR NIGHTMARE (House of Representatives - January 25, 1996)

Possibility of Default Starts To Worry Europe, Especially France

(BY CRAIG R. WHITNEY)

Paris. January 23: The possibility that the deficit-cutting impasse between Congress and Clinton Administration could start causing the United States Government to default on its debt next month has begun to sink in on European leaders, and the French are anxious to avoid the turmoil that could result.

President Jacques, Chirac, who will visit Washington next week, is prepared to warn in a speech to a joint session of Congress that default would upset economies around the world and deeply undermine the American global position, French officials said today.

Congressional Republicans have threatened to refuse to raise the national debt limit unless the Clinton Administration agrees to their agenda for cutting the Federal deficit. If the Administration refuses to give in and fails to find other ways of coming up with money, the Government could start running out of money to pay obligations due on March 1.

At this point some European leaders are said to be beginning to feel like onlookers at a political game whose players appear little concerned about the chaos a default would cause in international currency and bond markets.

Some see a situation comparable to that in 1975, when Chancellor Helmut Schmidt of West Germany felt compelled to warn President Gerald R. Ford that letting New York City go bankrupt could send economic shock waves around the world, which was still fragile from the effects of a sudden rise in oil prices.

Mr. Chirac told the Senate majority leader, Bob Dole, and Speaker Newt Gingrich during his last visit to Washington in the summer that the United States gave too little foreign aid to developing countries, and French officials say that he plans to deliver the same message to Congress in an address planned for Feb. 1.

`We hope that Congress will be disposed to let the United States lives up to its global responsibilities,' one official here said.

Mr. Chirac will tell Congress, French officials say, that Europe with about the same size economy as the United States, gives three times as much to developing countries--$31 billion, compared with less than $9 billion last year from the United States.

`Where is America and its traditional generosity, where is its desire to help reshape the world?' asked one French policy maker.

Mr. Chirac is also likely to use his visit to tell both Congress and the Administration that France will insist on reshaping the NATO alliance to reflect changes since the end of cold war, according to officials in Brussels and Paris.

Mr. Chirac has reintegrated France into some NATO military structures that it left in 1966, but officials say he did so to push for the creation of a stronger European defense arm within the alliance. `We need to be able to deal with crises like Bosnia even if the United States doesn't want to become involved,' an official said.

Mr. Chirac may also tell Washington that American plans to contribute $600 million to the reconstruction of Bosnia over the next three years are inadequate. European estimates of the total cost run to $3.7 billion. `Don't think that the Europeans will be the only ones paying for Bosnian reconstruction,' Mr. Chirac said in a recent interview, adding that the Europeans expected the United States to pay about the same as they will--about one third.

American officials have responded that the United States committed 20,000 soldiers to the NATO peacekeeping force that began moving into Bosnia last month, a larger contingent than any of its allies.

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