Duty free may be reprieved

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The Independent Online
THE LEADERS of France and Germany floated the idea yesterday of a five-year stay of execution on plans to abolish duty free shopping next June.

At the start of the two-day meeting in Potsdam, Prussia's - and subsequently Russia's - former garrison town, both sides conceded the Franco-German political axis had ground to a halt recently. But they promised a "fresh wind" in their relationship and sought to hammer out a common front in the coming battles over European integration. The meeting is the first formal Franco- German summit since the end of the Kohl era.

In the first significant breakthrough for the campaign to save duty free, the German Chancellor, Gerhard Schroder, has asked his Finance Minister, Oskar Lafontaine, to use the forthcoming German EU presidency to lobby both the European Commission and the 14 other EU finance ministers to review their decision.

In a letter dated 25 November and obtained by The Independent, Mr Schroder warns that scrapping duty free will lead to "substantial job losses not just in Great Britain and in Germany but throughout the European Union. This abolition" he wrote, "is at odds with our avowed goal of reducing unemployment in the EU."

Lionel Jospin, the French Prime Minister, is expected to back the German call for a rethink. The French Finance Minister, Dominique Strauss-Kahn, will use a meeting with EU colleagues in Brussels today to unveil a new report showing that 12,000 French transport jobs are at risk. The French are demanding that the European Commission produce a thorough study of the socio-economic consequences of abolition. A Franco-German alliance on the issue could be formalised at today's summit of the French and German leaders in Potsdam.

Mario Monti, the European Commissioner for the internal market who has turned abolition of duty free into a personal crusade, yesterday dismissed the suggestion that it could be salvaged. A spokeswoman pointed out that it would take a unanimous decision of the finance ministers to overturn the 1991 decision to axe it.

But the strength of support from the German Chancellor has taken British diplomats by surprise. Gordon Brown, the Chancellor of the Exchequer, displayed some ambivalence to the question of an impact study when it was discussed by EU finance ministers in May, but British sources conceded yesterday that the issue was one of great popular concern.

The Irish Transport Minister, Mary O'Rourke, also said yesterday that after a series of informal contacts she believes there is mounting pressure for a postponement. "France and Germany are in agreement with having a full look at it and if possible in having an extension of time. I think it will go down to that eventually.

"There is a distinct shift of policy. The winds of change are blowing in favour of the retention of duty free."