The European Elections: Countdown to monetary union: Andrew Marshall and Sarah Lambert unravel some of the mysteries surrounding the proposed move to a single currency

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The Independent Online
Q: Will there be a single currency by 2000?

A: Not necessarily, despite what Leon Brittan, EC trade commissioner, and Chancellor Helmut Kohl may say. The first possible date is 1997, but only if a majority of the member states have economies healthy enough and, on present performance, this is unlikely. The next rendezvous is 1999. By that time, according to the Maastricht treaty, the EU heads of government must have met to decide whether any countries fulfil the economic criteria. Even then most of the 12 must decide in favour, the criteria must have been met and the European Parliament must give its approval. Theoretically, a single currency could come into effect but the hurdles are huge.

Q. What are the criteria?

A. Each participating country must have low inflation, similar interest rates, a stable currency in the Exchange Rate Mechanism and a manageable budget deficit. Some complain efforts to achieve this are keeping Europe's unemployment high - ironically, Britain approves of it.

Q. Hang on, doesn't Britain have an opt-out on all this?

A: Yes, the government of the day must decide if it wants to move to a single currency with everyone else. Meanwhile, the economic criteria are judged by the Conservatives to be sensible anyway and all governments are trying to work towards them. But for political reasons, the Tories have to waffle about whether it will happen and what they would do if it did.

Q: Surely the UK isn't even a member of the ERM?

A: Dead right, and the decision to rejoin cannot be forced. Again the government of the day will decide whether it is in the national interest . . . This time, they would probably have to persuade others they could stay in, after 1992's embarrassing exit.

Q: Is everyone else gung-ho about the idea?

A: Far from it, Denmark has an opt-out similar to Britain's and even Germany is wary of giving up the Deutschmark. Only plucky Luxembourg meets the criteria, though others are getting closer.

Q: In fact, isn't the Ecu a single currency?

A: The value of the European Currency Unit is determined on the basis of the value of the currencies of individual member states and, in that sense, is a single currency. But you can't buy anything with it in a shop, which is the point of the single currency.

Q: Would this single currency mean the end of the Queen's head on coins?

A: Rumours that Jacques Delors will put paid to the Queen are not true. No one has got as far as deciding what exactly the single currency would look like or be called.

Q. Would the change happen overnight?

A: No, probably more gradually like decimalisation but teams of experts are, as we speak, debating the pros and cons of different approaches.

Q: Will a single currency mean the death of the Bank of England, and Chancellor of the Exchequer?

A: No and no, although it would suggest that national economic policies show greater similarities. The right to decide what and how to tax people will still be up to member state governments, ditto the distribution of a country's wealth. The Chancellor's brown bag will remain, but he would have less say over what went in it. European central banks are already in close contact with each other but all jealously guard their independence though some are more independent than others. When Eddie George raises an eyebrow these days, he has to keep the other eye on the Bundesbank and the Banque de France.

Q. Isn't the single currency a plot for German economic domination?

A: Not quite; the Bundesbank has so much power because currency dealers respect it and the German economy is strong. A European central bank will be created (indeed it already exists in embryonic form as the European Monetary Institute) to manage those aspects of economic policy that have to be co- ordinated. It will be in Frankfurt, but it will not be run (entirely) by Germans. More's the pity; they're rather good at that sort of thing.