French election seen as crucial

Labour's historic decision to give the Bank of England effective control over interest rates may have made waves in Britain this week, but it seems to have done nothing to improve the likeliehood of economic and monetary union going ahead on time. Talking yesterday on the 49th anniversary of the Schuman declaration which launched the great European project, our panel continued to regard the outcome of the French elections as far more important to the future of EMU.

Alison Cottrell of Paine Webber summed up the likely effects of the Chancellor, Gordon Brown's, cessation of control over monetary policy. "If it helps the European brotherhood, then that helps make EMU more likely, but if a centre left government [is returned in France] then it becomes irrelevant."

Martin Brookes of Goldman Sachs was one of several who pointed out that Mr Brown's move to cut the political bonds of the Bank of England was not yet sufficient to satisfy the requirements of the Maastricht Treaty.

With the consensus still that the UK will not join in the first wave in 1999, the attention of our pundits remains firmly focused on France, where opinion polls suggest the gap between right and left has narrowed to almost nothing. The received wisdom is that a victory for the socialists could delay EMU as the Germans would not accede to their terms, but the picture is far from clear cut.

On the plus side for the early integrationists, the polls are still showing a wafer-thin majority for the Gaullists, while Graham Bishop of Salomon Brothers pointed to signs of fragmentation on the left after the Communists appeared to harden their stance on EMU. Against that, Michael Lewis of Deutsche Morgan Grenfell tentatively suggested French national holidays may be distorting the polls.