A row between France and Germany over how to move towards a single European currency emerged into the open at a meeting of finance ministers in Brussels yesterday. The two principal architects of the single currency disagreed over the timetable for deciding which countries will qualify to join.
Discussions were held up by several ongoing disagreements over the timetable, while Jean Arthuis, French Finance Minister, and Theo Waigel, his German counterpart, are in dispute over the date when EU heads of government must decide which countries qualify to be part of the single currency.
It has been widely assumed that EU heads of government would decide in late 1997 or early 1998 which countries meet the economic criteria set out in the Maastricht Treaty. This would allow a year for final preparations before the launch.
At the Valencia meeting of finance ministers in September, member states decided that the decision should be based on 1997 economic results. Germany is now insisting that the selection should be made as late as February or March 1998, to ensure that there has been time to assess the economic figures properly. France insists that the decision should be taken as early as possible, and well before its parliamentary elections in March 1998.
Diplomats said yesterday that the dispute had not been resolved and would now be decided at the Madrid summit next month. The Chancellor, Kenneth Clarke, described as ''draconian'' new German plans to levy heavy fines against countries that do not obey strict budget deficit rules after the launch of a single currency.
However, Mr Clarke was eager to head off a clash with Euro-sceptics on the eve of the Budget. Speaking after the meetings in Brussels, he insisted that should Britain decide to join monetary union, nothing in the German plan could possibly pose a long-term threat to British sovereignity. "There is no German proposal that would threaten our right to set our own taxes and public expenditure."
The German plan for a "stability pact", discussed yesterday for the first time, has unnerved several member states because it proposes stringent new measures for keeping economies in line after the launch of monetary union and sets high fines for the back-sliders.
Mr Waigel has proposed that EMU countries should aim to keep budget deficits between 1 and 3 per cent of gross domestic product. Countries would be fined 0.25 per cent of GDP for each percentage point above the 3 per cent ceiling.
Although the principle of a stability pact was accepted by most member states yesterday, the finance ministers proposed that the European Commission should draw up new proposals, as a basis for hard negotiations.
British acceptance of the German plan would leave the government of the day - if it chooses to opt in to monetary union - open to accusations of devolving more powers to Europe. "Mr Waigel has put this forward as a starting position," said Mr Clarke. He added: "The fines and penalties are draconian."
Ruairi Quinn, the Irish finance minister, told his partners that Ireland would not accept the fines, while The Netherlands proposed that other means of forcing countries into line should be considered.
Last night, finance ministers were working late on the details of the timetable and scenario for the introduction of monetary union. Their proposals will be presented to the summit of heads of state in Madrid next month.
Hamish McRae, page 22