Europe divided on single currency: Clarke claims Britain's view is prevailing Differences emerge over speed of return to narrow bands

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The Independent Online
BRITAIN'S view of monetary union is prevailing, Kenneth Clarke said yesterday, as fresh splits emerged over Europe's path to a single currency.

Finance ministers and central bank governors meeting in Athens clashed over how the European Monetary System should be put back on track, and how to progress towards European Monetary Union. 'I think I am in the mainstream of finance ministers from the bigger countries who make the running,' the Chancellor told BBC radio afterwards.

Germany and France oppose moving rapidly back to narrow bands in the EMS after last year's crisis which nearly destroyed the system. Belgium and Denmark have led some of the smaller countries in pushing for a return to the tighter disciplines of the EMS. But Mr Clarke said: 'I don't think they were major players here today.'

French sources said a return to narrow bands would have to await lower inflation in Germany. Hans Tietmeyer, the Bundesbank president, said that inflation was still too high at 3.2 per cent.

The Chancellor said that despite Britain's recent European problems, opinion on monetary matters was moving in the Government's favour. 'The whole tenor of the discussion has changed,' he said. 'I am totally in the mainstream of discussion here.'

Britain's scepticism about the timetabled path to a single currency through the disciplines of the EMS is now shared by France and Germany, but opposed by other smaller states. The dispute is likely to intensify as the year goes on and public discussion on monetary union and the EMS resumes.

Alexandre Lamfalussy, head of the European Monetary Institute, wants the convergence of Europe's economies to be given pre-eminence rather than a timetabled approach. But the smaller states want to push the pace by giving Europe's embryonic central bank new powers over monetary policy and tightening co-ordination.

Officials in Athens said there had been tough talking including a mini-revolt by the governors of the larger central banks, especially Mr Tietmeyer. The Bundesbank president underlined that countries were responsible for their own monetary policy, reaffirmed the German central bank's independence and resisted pressure for interest rate cuts.

The Chancellor also announced that the Channel tunnel rail link will be one of the first schemes to be funded under new European Union transport plans. It is one of 10 projects to be given priority in the construction of Trans-European Networks, large-scale infrastructure connections.

Ministers discussed how the EU could work with private capital for these projects, with estimates that a total of ecu20bn ( pounds 15bn) a year will be needed from European funds. Of this, ecu8bn has yet to be found.

However, Mr Clarke continued to resist the idea of allowing the European Commission to borrow money so that it could lend cash itself. 'There was', he said, 'continued doubt about the need for any new financial instrument and for the union to raise extra money through bonds.' But Britian's resistance to the Commission's infrastructure plans, contained in a White Paper presented last year by Jacques Delors, is much reduced. 'Now we've got down to the detail, we're making more sensible decisions,' Mr Clarke said.

The informal meeting was meant to discuss measures to promote European growth through infrastructure projects, funding for central and eastern Europe, as well as the new European monetary institute. But debate over monetary and interest rate matters, including behind the scenes discussion about how to resurrect the EMS, dominated the gathering.

In the past few weeks there has been increasing debate about what steps need to be taken to put Europe back on track for a single currency by 1997. But the monetary disasters of the past two years have instilled caution in Europe's biggest monetary players, France and Germany, and views about the Maastricht treaty's route to a single currency have shifted.