The fact that member states are beginning to address the problems raised by having separate economic groupings is an indication of how real the practical problems of achieving monetary union have become. The very concept of "two speeds", "two tracks" or "two cores" would appear to run counter to the fundamental values of European union, and could undermine the single market.
Nevertheless, the need to address so-called "monetary cohabitation" burst on to the agenda of the Cannes summit last week when the heads of government called for a new study by their finance ministers of the relationship between the two groupings. Both the countries which will be inside and those who will be outside have voiced concerns.
France, for example, which would be in the "inner core", is worried about the possibility that its poorer neighbours, which are likely to be outside EMU, will continue to devalue their currencies, thereby gaining unfair trading advantages. Since September 1992 the Italian lira has fallen by 30 per cent, and Jacques Chirac, the new centre-right President of France, claimed the currency's decline had badly damaged French exports of calves to Italy.
Smaller countries which are likely to be outside EMU, at least in the early years, worry that investors will put their capital elsewhere, and that the "outer core" will become Europe's permanent second division.
The discussions coincide with a new Tory tactic on EMU which emerged during the leadership campaign last week, when Mr Major began to sketch out the circumstances in which Britain might find itself if it chose to opt out of the single currency. Far from suggesting that the "outer core" might be a second division, Mr Major painted a picture of brave little states, championed by Britain, fighting off a "directorate of the big states". He did not appear to take into account that these smaller states are all anxious to join EMU, not to stay out.
The finance ministers' discussions could play into Britain's hands by focusing new attention on the many practical and political problems of bringing monetary union about, and Britain may be hoping the debate will force new doubts to the surface, particularly in France, where enthusiasm for EMU is cooling.
However, Mr Major could also face embarrassment if the idea of a new ERM for the outer core is accepted. The Government has made clear it would not join another ERM during this parliament. Mr Major could, therefore, find himself in the position of opting out of both currency arrangements. Europe could re-form into three groups, with Britain alone in the outermost group.
It is unclear how the finance ministers will approach their discussions, given that formal talks on which countries will join EMU and which will not remain a highly sensitive matter. Denmark and Britain are the two with an option not to join, but there are several other states who will clearly not make the EMU grade, because they will not have met economic convergence criteria which include reducing deficits and controlling inflation.
Smaller states most likely to be in the outer core are Greece, Italy, Spain and Portugal, although there is also uncertainty about Sweden and Finland. These countries, particularly Spain, which has just taken over the EU presidency, will not wish to be singled out as EMU "failures" at a time when they are selling tough economic policies at home, with the message that these measures should qualify them for the single currency.Reuse content