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Battle to repair damage of the summit's fudge on bank chief

THE SUMMIT was a milestone in the euro timetable, although the fudge on the presidency of the European Central Bank detracted from what should have been a triumphant occasion for participating states.

All 11 hopefuls were given the green light to be in the "first wave" of economic and monetary union (EMU), and European leaders also approved the"bilateral conversion rates", or euro exchange rates.

Those rates will not be irrevocably frozen for seven months. However, the central banks of the 11 participants will be expected to use "appropriate market techniques" to ensure that market exchange rates equal the approved conversion rates.

The next seven months will be critical for the ECB's credibility. The first meeting of the council is scheduled for 2 June, which is earlier than expected.

Analysts predict that ECB officials will be making all sorts of anti- inflationary noises over the coming months, in an attempt to repair damage done to the bank's credibility over the weekend.

Exchange rates for participating countries will be irrevocably locked on 1 January 1999. From then until 31 December 2001 - the "transition period" - euros will be traded electronically and new issues in government debt will be euro-denominated. It will not be compulsory to trade in the euro, but wholesale financial activity -transactions between financial institutions - is expected to move quickly to the euro standard.

Euro notes and coins will be introduced for first-wave participants on 1 January 2002. Retail activity - transactions between financial institutions and the public - will also be denominated in the euro from this date. The euro notes and coins will co-exist alongside local currencies until 30 June 2002. On 1 July 2002, local currencies will cease to be legal tender.