Major warns as the Euro is born

SARAH HELM

DONALD MACINTYRE

Madrid

The "Euro" - a currency to replace the franc, the mark, the lire, the peseta, and possibly the pound - was born yesterday.

Despite stark warnings given by the Prime Minister, John Major, the EU took the historic decision to agree a name and confirm a timetable for a single European currency, to reach the streets by 2002.

Kenneth Clarke, the Chancellor, insisted that Britain would keep its options open and decide whether to participate in monetary union in early 1998 - ignoring the pleas of Euro-sceptics for an election pledge to preserve sterling.

The European Commission will now draw up plans to "sell" monetary union to the public with one of the biggest advertising and education campaigns in history.

The EU's leaders agreed to identify the list of the first states to join EMU early in 1998; lock exchange rates and set up the European Central Bank in 1999; and introduce the new - uninspiringly named - "Euro" notes and coins in January 2002.

The fresh impetus towards monetary union came despite a stark warning from the Prime Minister that potential conflict between a minority of countries inside EMU and the majority outside could, if unchecked, "damage if not destroy the single market".

He also warned that a single currency could trigger "chaos" right across Europe "if we get it wrong". He said that a botched monetary union could act as a barrier preventing new countries from east and central Europe joining an enlarged EU.

But Mr Clarke made the clearest statement to date that the Government would not rule out membership of the single currency as part of its platform for the next general election. "I do not expect that to be in the manifesto," he declared last night. Mr Clarke added that he believed the chances of a group of EU countries going ahead with EMU - whatever Britain decided - was now 60-40.

The decisions on EMU amounted to a triumph for the German Chancellor, Helmut Kohl, who secured his goal of using the Madrid summit as a signal of progress towards European integration. Jacques Chirac, the French President, reaffirmed France's determination to meet the 1999 deadline, against a backcloth of civil unrest in France, caused in large part by budget cuts aimed at bringing the French economy within the strict rules laid down for EMU membership.

Jacques Santer, President of the European Commission, said Europe was "now irreversibly on track towards the union's single currency". Felipe Gonzalez, the Spanish Prime Minister, said yesterday's decisions were "a triumph for the EU".

The decision to call the currency the Euro was another German victory, but debate about the name of the currency was intense, with President Chirac making a last-minute plea for the Ecu, and suggesting that the decision should be delayed until public preferences had been tested in opinion polls.

Mr Major expressed little enthusiasm for the "Euro" but made no firm bid of his own. The Prime Minister described "Euro" as a "fairly uninspiring name" with "little historic resonance" and added: "I would prefer to have something more dignified with a European history - the florin, the shilling, the crown, something of that sort but . . . it is really a secondary issue."

Leaders were eager to stress that the name "Euro" should stand as its own and not merely be a prefix to create, for example, a "Euromark" or "Europound."

The British Government was last night working to ensure that today's final communique fully embodied Mr Major's call for a wide-ranging study of the implications of EMU for relations between countries inside and outside the system.

British officials said that Mr Gonzalez had undertaken that the incoming Italian Presidency would promote a full study of the implications.