The club that doesn't want Blair

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The Independent Online
The price of Britain's decision to stay out of the first wave of European monetary union was exacted last night as Tony Blair was forced to concede that euro-zone insiders could exclude Britain from certain key monetary and economic discussions. Katherine Butler watches a two- tier Europe unfold.

After eight hours of tense debate at the Luxembourg summit, Tony Blair yesterday signed up to a compromise which allows Euro X, an exclusive grouping of member states taking part in the single currency, to go ahead. The face-saving formula allowed Mr Blair to claim that he had narrowed the areas from which Britain could be kept out but was vague enough for those who will be in monetary union from the outset to claim that they also got the select club they wanted.

The deal commits the euro-zone governments to opening up their club to the "outs" when matters of "common interest" are at stake and pledges formally that decisions relating to economic co-ordination will remain in the hands of all the 15 finance ministers.

But it will be up to the participants of Economic and Monetary Union (EMU) to determine when a question is of common interest. And the text of the agreement recognises formally that those in the euro-zone may meet alone on matters of "specific interest" to them. Mr Blair has, in effect ,conceded the principle of a two-tier Europe, a system whereby those not taking part in the single currency can be excluded from political debate on currency management questions linking those sharing the new money.

French minister Dominique Strauss-Kahn, whose government masterminded the new forum, said the 11 "insiders" now had legitimisation for closed- doors discussions on such questions as taxation, budget deficits, and income policies because these could all have an effect on the value of the euro.

The main safeguard won by Britain, Denmark, Sweden and Greece - all likely to remain outside EMU in the first wave in 1999 - is the goodwill of the EMU countries that they will open the doors when areas of general concern are on the agenda.

Mr Blair welcomed the deal as "perfectly sensible", saying he was "absolutely delighted" that the matter had been resolved. He claimed the "out" countries had won the assurance that they would be given the right to participate when matters of common interest arise.

Government officials said the compromise, drafted by the Luxembourg presidency, retained most debate and all real power in the normal EU council of ministers.

Earlier, the French led resistance to Britain's demand that the outs should "by right" be invited to take part in all but a narrowly defined series of confidential topics. And afterwards, Mr Strauss-Kahn insisted that there could not be a limited list of areas where talks would be restricted to the euro-zone. He anticipated monthly informal meetings of the 11 likely to be qualify for EMU at the start. He said an agreement became possible after "our British friends understood they would have to be pragmatic".

What seems clear is that in the event of a dispute over "common interest", those not in the club could demand to have a matter they felt affected them referred to the next meeting of all 15 finance ministers (Ecofin).

Mr Blair's spokesman interpreted this as a victory for the "outs" which would render the Euro X discussions irrelevant. "Power will remain in Ecofin," he said. But other government officials said that there would be nothing stopping the inner group from holding their discussions on the disputed matter before it was referred to Ecofin.

The row over Euro X dominated the first day of the summit and the debate was clearly acrimonious. The French Prime Minister, Lionel Jospin, was reported to have reminded Mr Blair that Britain "invented clubs" so should not object when it was occasionally shut out of them.