Britain battles to block new EU currency council

Faced with marginalisation in Europe, Britain will fight today to block plans for an `economic government' which excludes countries not taking part in the single currency at its launch in 1999. Katherine Butler in Brussels says the Chancellor will challenge France and Germany but may find himself reduced to arguing about who pays for the sandwiches.

Ministers from Britain, Sweden, Denmark and Greece, all of whom are likely to remain outside the Euro-zone in 1999, are challenging proposals to set up a new body, which is being reserved exclusively for finance ministers of governments taking part in Economic and Monetary Union from the start.

Known as "Euro-X", the X standing for the precise number of "ins", the terms of reference for the new council have already been bilaterally agreed between the French and Germans. They will be debated by the 15 EU finance ministers for the first time today when they meet in Brussels.

At the meeting, the Chancellor Gordon Brown will argue strenuously that the regular monthly meetings of all 15 EU finance ministers, which are known as "Ecofin", ought to remain the only decision-making body on economic policy under the terms of the European Union treaty.

Denmark and Sweden, which have signalled they will also opt out of EMU in 1999, will also protest today to being excluded from the new body, because it could take decisions having a direct effect on the economies of the "outs".

The difficulty faced by the so-called "outs" (who insist they ought to be called "pre-ins" because they say they do want to join at a later date), is that they cannot legally veto a decision by a group of EU governments to hold informal meetings outside the framework of the normal EU institutions. Such informal contacts already take place on a regular basis on a wide range of subjects.

Although the new body is "informal" in theory, and has no binding effect, the big fear about the new elite EMU grouping is that it will "pre-cook" crucial decisions on matters ranging from exchange rate policy, budgets and taxation, to employment and labour strategies before referring them to Ecofin for rubber stamping.

British officials hinted at the weekend that the Government's strategy might be to prevent the use of official EU meeting rooms, complete with heat, light and interpretation facilities, or EU catering facilities, by any informal grouping which excludes certain member states. "I don't see how they could call on the delicious coffee and excellent sandwiches or any other facility paid for out of the EU budget," said a senior British official.

Bonn has indicated it wants the new "council" to be formed on an intergovernmental basis which would not alter the status of Ecofin's monthly meetings. If the Euro-X is indeed this informal, in legal terms, then Mr Brown seems powerless to do anything other than make life difficult by ordering his "in" colleagues to take themselves off to a local hotel for their monthly talks.

Behind the scenes Britain has unsuccessfully been lobbying for observer status on the Euro-X. French officials repeated at the weekend that they believe giving the "outs" even an observer seat is "out of the question". It would be "absurd" and impracticable, they said.

But the French also admit they want a "legal framework" for the Euro- X to be agreed by EU heads of government in December. This would obviously require British agreement. Gordon Brown's glimmer of hope must be that to overcome a British veto, some form of "bridging mechanism" which would allow him to claim the Government is not being shut out completely, could eventually emerge as the compromise.

Britain may also try to take advantage of the fears of some of the smaller "in" governments who are lobbying to have the European Commission officially represented on the Euro-X. Some believe that Commission involvement would balance the domination of the French and Germans but Bonn and Paris are anxious to see this limited to ad hoc attendance by EU commissioners.