British seat at Euro bank set to raise hackles

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The Independent Online
Helmut Kohl wants to ease Britain's late entry into monetary union with the promise of a seat at the European Central Bank. But his plans are set to cause resentment among other governments which fear that their efforts to qualify on time could now go unrewarded. Katherine Butler predicts trouble ahead.

It is legally possible but politically unsustainable. That is how many Brussels observers view reports from Bonn signalling that Chancellor Kohl wants to reserve a place for Britain around the table of the world's most powerful independent central bank.

Germany has been cautious not to make any public comment on the proposals, partly because of worries about how other countries, which might also hope to be in the elite club, could react. The suggestion appears to have come from Mr Kohl's office, which is often responsible for Germany's most sensitive foreign-policy decisions. The official line, reiterated at the weekend, remains merely that Germany would be pleased if Britain joins "at the earliest possible moment".

At his recent meeting with Tony Blair, Mr Kohl was relaxed about British delays. German officials said he told his host: "We are not worried if you do not join immediately. We understand your problems." This conciliatory tack seems to be based on the German perception that a partly enthusiastic Britain is better than an unenthusiastic one and that a Britain which catcalls from the margins could still be damaging to the future of the "European idea".

What the German leader and his advisers want is to entice Mr Blair into a commitment that Britain will join in 2002, when Euro notes and coins go into circulation. As a reward, Britain's EU partners would leave a place vacant on the executive board of the future European Central Bank when it is established next year. The empty chair would have a British flag on it, and the place would go to a senior representative of the Bank of England from the date of Britain's entry.

From Britain's point of view, the idea of a vacant slot with a "reserved for Britain" sign on it would allay fears that the UK could be shut out of monetary decision-making. But Italy, now expected to qualify for the 1999 first wave of EMU, would view such a move with particular dismay, because it could rob Rome of its own "rightful" seat at the table. The biggest flaw in the plan is that there are only six seats on the board - but the 11 countries which want to join in 1999 and are likely to qualify will be competing for places.

Britain will not have a vote on the composition of the board because it is exercising its opt-out from EMU in 1999. "This has very little chance of getting through" said a source. The ECB's executive board will be responsible for day-to-day implementation of the federalised monetary policy underpinning the single currency. It will be composed of a president, expected to be Wim Duisenberg, the Dutch president of the bank's forerunner, the European Monetary Institute, a vice-president and four others.

Assuming Mr Duisenberg is appointed president and Germany and France are represented, that leaves three seats to be fought over by eight possible candidates. One scenario which rests on the need to strike a political balance suggests that an appointee to represent small countries would be necessary. Ireland, Finland and Austria will be vying to fill that role. Spain will undoubtedly put in a bid to represent the "south" but that would leave Italy out in the cold if Britain had also to be accommodated.

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