Congress sees Franco-German split on monetary union: Alphandery and Tietmeyer are moving further apart on the European question. John Eisenhammer reports

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The Independent Online
THE WIDENED gap between the French government and Germany's central bank in their approaches to European monetary union was boldly highlighted at the European Banking Congress in Frankfurt yesterday.

Edmond Alphandery, the French Economics Minister, stuck doggedly to the Maastricht treaty, as if little of note had changed since 1991, stressing that 'the French authorities are ready to advance towards the union without delay'.

By contrast, scepticism in the Bundesbank towards a fixed timetable for achieving EMU has been dramatically sharpened by the break-up of the exchange rate mechanism. Hans Tietmeyer, the president of the Bundesbank, made clear that there could be nothing pre- ordained about convergence.

Ironically, the break-up of the ERM has brought Britain and Germany much closer together, at least in terms of their approach to monetary union. They are both strong advocates of the pragmatic, 'each country put your own house in order and then we shall see' approach.

'Regaining credibility by improving convergence is a serious and long-term job and requires co- ordinated action of all member states on their own responsibility,' Mr Tietmeyer said.

Eddie George, the Governor of the Bank of England, supported the assumption that 'stability must begin at home and that lasting exchange rate stability will, more reliably, follow from the common achievement of internal stability rather than the other way round'. Both the German and British central bankers therefore ruled out any return to narrow-band exchange rates for some time.

By contrast, Mr Alphandery's mantra-like repetition of the supremacy of the Maastricht treaty brooked no doubts about either the timing of the goal or the means of its attainment. Time and again, in response to questions about EMU, he replied: 'The answer is clear. It is written in the treaty.'

Mr Tietmeyer warned against any attempt to force the pace by the 'too ambitious and too early introduction of new instruments such as common targets for monetary aggregates'. The responsibility of each member country to pursue its own path to stability could not be 'neglected or overruled by the introduction of a new instrument like a deus ex machina,' he said.

Mr George stressed the danger of political aspirations running ahead of economic reality.

On the role of the European Monetary Institute in Frankfurt, France's more ambitious view contrasted with a shared British and German caution. Mr Alphandery described the EMI as 'designed to play a much more important role than is generally realised'. It must be a driving force for EMU, invested with a 'growing moral authority', he said.

While Mr Tietmeyer sees the institute's main role as lobbying for a stability-oriented monetary policy, Mr George said it would be 'extremely unwise for EMI to seek to force everybody into a common mould. That mould will emerge as convergence grows. It is terribly important that EMI concerns itself with the present rather than speculating on the future.'

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