Rest of Europe united in push for EMU

British fight alone to halt single currency. Sarah Helm in Dublin reports
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The Independent Online
European finance ministers, meeting today in Dublin, will brush aside Britain's latest warnings on the single currency, producing the firmest evidence yet of their determination to proceed in 1999.

The 15 ministers are expected to agree a series of far-reaching plans for how the nuts and bolts of European Monetary Union will work. The finance ministers intend to finalise key elements of a "stability pact", under which countries which join the single currency would be fined should their economies veer out of line after the launch.

The ministers will also move closer towards agreeing the shape of an exchange rate mechanism for countries who remain outside the Euro-zone in the first phase.

As the Dublin meeting intensifies preparations for EMU, both the Government and the Labour Party will come under increasing pressure to declare whether Britain will join the single currency. On Wednesday, Malcolm Rifkind, the Foreign Secretary, stoked up the British single currency debate by reviving the Government's warning that the single currency will cause divisions in Europe.

However, France and Germany have both re-stated that there can be no back-sliding on the EMU timetable, and there are growing signs that the Maastricht criteria on qualifying for EMU could be flexibly interpreted to allow as many countries as possible to join. Several countries which appear unlikely to qualify for the launch, such as Spain and Belgium, have expressed determination to bring their economies into line.

A positive mood in Dublin will be significantly reinforced by predictions that France will pass the economic qualifying test for EMU, albeit with some deft interpretation of the rules. Without France the entire project would be threatened.

However, in a crucial development, the European Commission signalled this week that it may be prepared to accept a new French attempt to ease its public deficit in 1997. The move involves a one-off payment of 37.5 billion French francs (or 0.5 per cent of its GDP) from France Telecom to the central government, as part of a privatisation process.

The proposal, which must be approved by Brussels, is viewed in some quarters as a blatant attempt to massage the deficit figures. Without this exceptional diversion of funds, France would have difficulty bringing its deficit figure below the magic 3 per cent of GDP. A senior Commission official said that the France Telecom payment would be "purely technical" and there would be "no question" of bending the rules.

The Dublin talks will centre on agreeing an outline stability pact, which ministers will present as a significant step forward for the single currency. The idea of such a pact was first proposed by Germany as a means of ensuring that countries who join EMU, in the first wave, continue to obey strict economic criteria. Such a pact was deemed necessary in Bonn, in order to ease public fears that the new Euro currency could be weaker than the mark.

Under the plan, countries inside the Euro would have to agree to hand over certain controls relating to tax levels and public spending to the European council of ministers. Any country which allows its budget deficit to rise above 3 per cent would have to present plans for "correcting" the problem.Should the deficit not be reduced within nine to 12 months the country would face a sliding scale of automatic fines.

The pact is certain to be viewed among British sceptics as further proof that Brussels plans to dictate fiscal policy, and that British sovereignty will be impaired if it joins EMU.