Bonn heads for rough ride over EMU fines plan

SARAH HELM

Brussels.

Germany's latest attempt to lay down the law over how the single currency will operate, including a plan for heavy fines on countries which fail to obey the rules, is likely to meet a cool response when it is discussed for the first time by finance ministers today.

Bonn's idea for a "stability pact" between states is intended to protect the single currency from inflationary pressure after the launch, planned for January 1999. Most countries accept the idea of such a pact but some of them fear the rules being proposed may be too strict for them to keep. Were Britain to join the single currency and then fail Germany's stability-pact rules, for example, it could be fined about pounds 1.5bn.

The issue is likely to dominate today's meeting in Brussels, which is supposed to take crucial decisions on single currency planning ahead of the Madrid summit next month. A dispute could raise new questions about whether the 1999 start date could be met.

The key element of the stability pact is a proposal to levy fines on countries which allow their budget deficits to exceed 3 per cent of gross domestic product. For every percentage point over the limit, a member would be fined 0.25 per cent of its GDP. The fine would be returned if the deficit fell to 3 per cent or below within two years. If the country failed to meet the target again, it would lose the money, which would be go to the EU budget.

Member states are trying to maintain solidarity over the single currency in the run up to the Madrid summit, but France and Ireland have already signalled doubts about some elements of the pact and Italy has been unenthusiastic. Germany is being privately criticised for pushing rules beyond those envisaged in the Maastricht treaty.

The European Commission has welcomed the principle of the pact, but has been pointedly silent about the proposed level of the fines, saying only that the penalties should be "appropriate", as envisaged under Maastricht. Some observers have speculated that Germany is deliberately pressing for unacceptably tough conditions to delay monetary union, or torpedo it altogether.

It is more likely that Helmut Kohl, the German Chancellor, has calculated he must impose stringent rules on his partners to convince the German public that the single currency will be as strong as the mark. German public opinion has become increasingly nervous about the dangers of an unpredictable monetary union.

Several important questions have to be settled by finance ministers before the Madrid summit, including agreement on the timetable for the run-up to the 1999 launch, when exchange rates will be locked, and the schedule for introducing notes and coins three years later.

The issue they will not wish to talk about today is what to call the currency. Governments are committed to deciding a name in Madrid. In September, it seemed that it had been settled in favour of the "Euro", Germany having refused to accept the original idea of Ecu. However, an opinion poll last week showed German voters preferred the Ecu after all.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Senior Environmental Adviser - Maternity Cover

£37040 - £43600 per annum: Recruitment Genius: The UK's export credit agency a...

Recruitment Genius: CBM & Lubrication Technician

£25000 - £27500 per annum: Recruitment Genius: This company provides a compreh...

Recruitment Genius: Care Worker - Residential Emergency Service

£16800 - £19500 per annum: Recruitment Genius: Would you like to join an organ...

Recruitment Genius: Senior Landscaper

£25000 - £28000 per annum: Recruitment Genius: In the last five years this com...

Day In a Page

The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

They fled war in Syria...

...only to get stuck and sidetracked in Hungary
From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

Title sequences: From The Prisoner to Mad Men

Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

Giorgio Armani Beauty's foundations

Sumptuous fabrics meet luscious cosmetics for this elegant look
From stowaways to Operation Stack: Life in a transcontinental lorry cab

Life from the inside of a trucker's cab

From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

Kelis interview

The singer and sauce-maker on cooking for Pharrell
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea