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Europe: Divisions Continue In EU Over Euro

  • Joel Blocker

Prague, 2 December 1997 (RFE/RL) - After more than 12 hours of often tense talks yesterday, the European Union's 15 finance ministers were unable to agree on a proposed inner council of members to coordinate monetary policy after they join the euro, the EU's planned single currency, in 13 months.

The failure of the Brussels meeting of "Ecofin" --as the finance ministers are known collectively in EU jargon-- set the scene for a bitter row on the issue when the bloc's leaders meet late next week (Dec. 12-13) for two days in Luxembourg, the Union's current president.

The Luxembourg summit's chief formal agenda item is the choice of with which of 10 Central and East European candidates -- plus Cyprus, an earlier applicant--the EU will begin membership talks in four months (Mar. 31). EU leaders must decide whether to choose the five candidates recommended in July by their own Executive Commission --the Czech Republic, Estonia, Hungary, Poland and Slovenia-- or else to include as well in the first round of talks some or all of the other five-- Bulgaria, Latvia, Lithuania, Romania and Slovakia. They are also due to begin discussion on reforming the EU's Common Agricultural Policy and regional funding, which together eat up four-fifths of the Union's budget and must be radically changed in order to permit a smooth expansion to the East.

Even before Ecofin's blatant failure yesterday, the summit's formal agenda looked likely to be overshadowed by another quarrel related to the creation of EU Economic and Monetary Union (EMU). This dispute is over who should be the first president of the European Central Bank (ECB) due to come into existence with the euro and set common monetary policy for those joining it.

Until early this month, everyone assumed it would be the Netherlands' Wim Duisenberg, the respected head of the ECB's existing forerunner, the European Monetary Institute. But in a transparent effort to block Duisenberg's appointment, France put forward its own candidate, the equally respected Bank of France head Jean-Claude Trichet. Now the quarrel over the ECB's first chief is the subject of intense behind-the-scenes negotiations, particularly among France, Germany and the Netherlands, and remains likely to take up much of the summit's time and energy.

Yesterday's bitter discord in Ecofin over the creation of a so-called "inner circle" of euro-joiners, proposed jointly by France and Germany, reflected continuing deep divisions within the EU between the 11 members likely to be in the first wave of euro-joiners and the four which will not. The four that will not join the EU's Economic and Monetary Union (EMU) immediately upon its creation in January 1999 are Britain, Denmark, Sweden and Greece. The first three are opting out of the euro, at least initially, for national political and economic reasons, while economically backward Greece is unable to meet the strict standards needed to join.

All four nations expressed fears that the proposed council would in effect replace Ecofin as the real center of economic power in the EU, shutting them out of decisions that will inevitably have a major impact on their economies and currencies. Britain's Chancellor of the Exchequer (that is, finance minister) Gordon Brown warned that the Franco-German plan would create what he called "an exclusive group." He also raised doubts about its legality, citing a stipulation in the 1992 Maastricht Treaty --the document that set up EMU-- that all EU members should treat currency issues as a matter of common concern.

Brown's Danish counterpart, Marianne Jelved, also warned that the suggested euro council would split the EU into two camps. Jelved said, in her words, that "if we cannot have the status of full members, then we want at least to be observers."

But France and Germany -- backed by the nine other likely EU joiners, including Italy-- were equally firm in insisting that members choosing not to join the euro could hardly expect to have a voice in its management. They argued that only those willing to take the economic and political risks of launching EMU should draw the benefits. French Finance Minister Dominique Strauss-Kahn said, in a quintessentially Gallic metaphor, "the single currency is a monetary marriage, and people who get married don't want anyone else in the bedroom." His German colleague Theo Waigel said that if the four "out" countries blocked accord on the council, euro-zone nations would simply meet informally.

Such an approach would suit Germany, wary that the council's deliberations could compromise the independence of the ECB, which it strongly backs. In contrast, France wants a clear legal framework for the council to enhance its credibility as a political counterweight to the EU central bank. In fact, the two co-authors of the euro-council proposals are themselves deeply split on its nature. On Friday (Dec. 5), a week before the Luxembourg summit, President Jacques Chirac will meet in Bonn with Chancellor Helmut Kohl to try at least to paper over the fundamental differences between the two countries' views.

Franco-German differences were one major reason why a joint compromise proposal yesterday by Luxembourg and the EU commission to bridge the gap between the council "ins" and outs" was unsuccessful. The compromise suggested that the probably 11-nation euro council operate as what it called a "sub-group" of the EU's European Council of all 15 members --its chief decision-making body. This would have assured that all decisions continue to be taken consensually by the 15, but it fell short of Britain, Denmark and Sweden's demands to actually sit in on euro council deliberations.

What all this increasing divisiveness presages is a Luxembourg summit largely given over to euro problems, rather than its official agenda of enlargement to the East. It also reflects not only differences over how to manage the euro but more basic doubts about its long-term effects. Those doubts are part of a growing public debate, both within and outside the EU, over whether it will benefit or disrupt the Union, and the West in general, and whether its launching will hasten or delay expansion to the East.