France and Germany yesterday laid out plans to implement a single currency which would relegate Britain to the slow lane of a two-speed Europe.
After a period when monetary union has seemed to be in abeyance, Bonn and Paris plan to give the idea a political boost ahead of Friday's Turin summit. The meeting is being called to rewrite the Maastricht treaty, which first set out the goal of monetary union.
The French and German finance ministers, Jean Arthuis and Theo Waigel, met in the north-western French town of Laval to set out ideas on how monetary union should operate. They said that they were determined to launch a single currency by the 1999 deadline, despite the economic gloom which surrounds both nations.
Mr Waigel stressed that the timetable for monetary union must be stuck to. "We plan to stick to the timetable since everything else could lead to exchange rate tensions," he said.
Mr Arthuis said France and Germany had agreed on the need for a system governing exchange rate relations between those who join a single European currency in 1999 and those who stay outside. This would recreate the European Monetary System, but with the Euro - the new European currency - at its heart.
The exchange rate mechanism would allow for "intervention by the European central bank, with the Euro as the anchor point", Mr Arthuis said. The idea is to penalise countries which allow their currencies to slide against the Euro. "We do not want to make way for competitive devaluations," Mr Arthuis said. The plan would mean that Britain could be asked to maintain a parity against the Euro - recreating the disastrous scenario which led to the pound's exit from the exchange rate mechanism in 1992.
Mr Arthuis said that the two ministers had also discussed plans to create a new body within the EU that would set economic policy - and from which Britain would be excluded if it chose not to enter a single currency. "We are talking about a council made up of ministers in the third phase [of European monetary union]," he said. This would counterbalance a European central bank, which would run monetary policy.
The plans emphasise that ahead of the Inter-Governmental Conference, Britain is as isolated in Europe as ever. "Britain is simply against any further steps towards integration," the German foreign minister, Klaus Kinkel, said yesterday. "I don't want to give the impression of being anti-British, but the fact that we're pretty far apart on some points is no secret," he added.
Policing the currency, page 12Reuse content