In the end, the squabble over the euro's launch may not matter, but Tony Blair's reputation took a hammering. By Katherine Butler in Brussels, Stephen Castle in London, Imre Karacs in Bonn and John Lichfield in Paris
LAST weekend Brussels, next weekend Birmingham and next month Cardiff.

As many of the participants in the birth of European monetary union move from one summit to the next, they are still trying to apportion blame for the acrimony that broke out over the appointment of Europe's central banker - and increasingly the fingers are pointing at Tony Blair. "If the British are as poorly prepared for next month's European Union summit in Cardiff as they were in Brussels, we are in for chaos," one senior European official warned last week.

The historic agreement to merge 11 currencies into the euro was tarnished by the squalid row over the presidency of the European Central Bank (ECB). A fudged deal, under which the Dutchman Wim Duisenberg will be appointed for the full eight-year term, but will hand over halfway through to the Frenchman, Jean-Claude Trichet, almost fell apart thanks to Britain's EU presidency, say many of those involved.

Chancellor Helmut Kohl emerged with his chances of re-election in Germany in the autumn severely damaged, but the main victim of last weekend's mayhem was New Labour's aspirations to leadership in Europe.

Given the deadlock between the French and Germans over Mr Duisenberg's appointment, his tenure and whether any written guarantee could be given that he would make way after four years for Mr Trichet, the onus was on the presidency to broker a deal. Mr Blair had held telephone conversations with Messrs Kohl and Chirac in the preceding days and weeks, and the day before the summit he visited his Dutch counterpart, Wim Kok, in the Netherlands. But this fell well short of the round-Europe shuttle diplomacy which prime ministers holding the EU presidency often undertake before difficult summits.

Not for the first time in Mr Blair's presidency, Europe was taking second place to global or domestic aspirations: the Northern Ireland referendum and Middle East negotiations due in London. As premier of one of the four countries not taking part in the first stage of EMU, and the inheritor of many years of Tory intransigence, Mr Blair had little moral authority. "It was very difficult to foist ourselves on people," one diplomat confessed.

Mr Kok, facing an election days after the summit, was in no mood to give way in public to the French. Mr Kohl was giving mixed signals: torn between his wish to bow to the French while also reassuring the German voters about the credibility of the euro. All the same, a deal seemed to be close. Four days before the summit Mr Duisenberg telephoned Luxembourg's Prime Minister, Jean-Claude Juncker, to confirm that he would not insist on serving the full eight years. The one thing that had to be avoided was any suggestion that his term was being officially truncated, which would be illegal.

AS 2 May dawned, there was growing confidence that the deal was more or less in the bag. Lunch had been organised for 1pm on the eighth floor of the Justus Lipsius building, and the 15 leaders were due to line up for a "family photograph" at 2.45pm. The summit proper, to decide the creation of the euro and the presidency of the ECB, was due to run from 3pm to 5pm.

But lunch had no sooner started than Mr Blair left, calling the key players, Messrs Chirac, Kohl and Kok, into the presidency room to go through the "gentleman's agreement". This is when Mr Chirac, determined to emerge with a clear victory for France, began to push his luck. He wanted a firm date for Mr Duisenberg's "voluntary" departure. That should be 1 January 2002, when euro notes and coins were to go into circulation, he told Mr Blair.

Mr Duisenberg officially informed Mr Blair that he was prepared to step down early on age grounds, but he was asked to confirm in writing that he would make way for Mr Trichet after the introduction of the euro on 30 June 2002. The Dutchman hit the roof: there was no way he was going to sign up to any specific date.

At this point only the Dutch were holding out, but a psychodrama was developing in the German camp. Learning of the demand being made of Mr Duisenberg, Hans Tietmeyer, head of the Bundesbank,reportedly threatened to resign. The German Finance Minister, Theo Waigel, spelled out the consequences to Mr Kohl. The German Constitutional Court had accepted the Bundesbank as the final arbiter on the legality of monetary union. In a legal challenge, the central bank would testify that splitting the term of the ECB president was against the Maastricht Treaty, and the court would have no choice but to rule against the German government, forcing Germany to withdraw from monetary union: that would be the end of the euro. "We can't go home with this," said Klaus Kinkel, the Foreign Minister.

Mr Kohl told his fellow leaders that he could not sign the deal as it stood. Mr Duisenberg had to be seen to retire of his own free will, at the time of his choosing. Mr Kohl and Mr Chirac both threatened a veto.

In the dining room, meanwhile, the formal lunch was degenerating into something resembling the Mad Hatter's tea party. After the salmon and scallop tartare entree there was still no sign of Mr Blair returning, and the fillet of lamb was going cold in the kitchens. Mr Blair would come back from time to time, but would then disappear with Mr Kohl, Mr Chirac or Mr Kok without making any general announcement.

By mid to late afternoon, 11 of the 15 leaders around the dining table been given no indication from the presidency of how things were developing. They began to wander in and out of the room or break into small groups chatting. "It was chaotic. The corridor was like the high street on a Saturday afternoon, with officials, ministers and leaders all milling around," said one insider. "It was impossible to get any sense of where things were headed."

Mr Kohl at one point was seen regaling a group of about six or seven leaders with stories of his youth as they knocked backclaret. "We went through two phases," says a Benelux official. "First people began to laugh, it was all just so odd. But that soon turned to anger."

Mr Tietmeyer and his friend Mr Duisenberg worked out a solution: to have the Dutchman say what Mr Chirac wanted to hear, but not on the record. It took five hours to badger the French and then the Dutch to agree.

Downstairs, among the thousands of journalists,a sense of crisis took hold as people began to imagine the entire EMU project derailing. The only sign of news from the presidency had been a Downing Street "indication" around 6pm that a deal was more or less fixed, conveniently just in time for the British Sunday paper first editions. This merely added to the confusion.

As day wore on into night the Belgian Prime Minister, Jean-Luc Dehaene, furious at the waste of time and lack of communication, and getting hungry again, suggested acerbically that those who had been excluded should decamp to the centre of town. "I know plenty of restaurants where they do better food," he said. Next door the French Finance Minister, Dominque Strauss Kahn, started a World Cup football sweepstake.

Shortly after midnight the television screens in the press area, which for 11 hours had carried the information "The lunch has been delayed", flickered into life. Mr Duisenberg had finally made his "spontaneous remarks" before the European Council. They were not included in the official minutes, but the French made sure they were distributed to the press.

As the leaders emerged from the hall for the "family photo", Mr Kohl found himself standing next to Mr Chirac, and growled that his chance to present himself as the defender of a "hard euro" in September's general elections lay in ruins.

Mr Chirac's stubbornness received a surprisingly good press at home: even Le Monde treated the incident as a salutary defeat for German arrogance and especially as a defeat for the Bundesbank. But for both Mr Chirac and the French papers, it was transferred emotion. It demonstrates the need to subliminate national feelings in the drive to create the European currency. Because they cannot be applied to the big issues, they tend to attach to the smaller ones.

THE rest of Europe was not blaming Mr Chirac, however: for them the culprit was Tony Blair. Tearing up the unwritten rule that you never bad- mouth the presidency in public, prime ministers queued up to rubbish his "ill prepared" handling of the talks, as Italy's Romano Prodi witheringly put it. "Now we know how not to do it," said Viktor Klima of Austria, who succeeds Mr Blair in the presidency. "People more experienced than I were saying they had never seen anything like it."

"My impression is that the government of Tony Blair ... did not make adequate preparations," declared Mr Juncker. "The whole agenda was chaotic ... Tony Blair underestimated the difficulty of the negotiations."

Mr Dehaene, calling it "the longest lunch of my career", incurred British wrath by making his feelings clear while the negotiations were still going on. "Are you furious with Chirac?" shouted a Belgian television reporter. "No," came the emphatic reply. "With Blair, then?" "Well, it was the way he handled things," he spluttered.

Experienced EU hands believe Mr Blair made a tactical mistake in breaking off into "bilaterals" at the outset. "You never do it until you are near the end, and you want to unblock the final details," said one senior official. Operating on the lines of the Northern Ireland talks, however, he was determined to avoid a plenary meeting until the deal was squared. This was a critical error of judgement, the others believe: 15 leaders in the room could have demonstrated to Mr Chirac how isolated he was.

"I think we ended up more or less where we began, but that's what happens when you get 3,000 people negotiating," said a weary Bertie Ahern, the Irish Prime Minister, before he left.

Comments