Bruton smoothes way for Kohl

Germany and her European partners appear to be close to a deal over the mechanism of enforcing financial discipline among states participating in monetary union. "An agreement is within reach," said the Irish Prime Minister, John Bruton, after his meeting with Chancellor Helmut Kohl yesterday.

Mr Bruton, whose country currently holds the EU presidency, was visiting Bonn in an effort to minimise potential conflict at next week's Dublin summit. Germany holds the whip hand on two of the most contentious issues facing the heads of European governments in Dublin: how to achieve a stable common currency, and how the community's decision-making process can be streamlined.

Bonn's proposed "stability pact" for countries switching to the euro in 1999 has been denounced as too Draconian by every member state except The Netherlands. In the face of opposition, Germany is having to retreat.

"Ninety-eight per cent of the agreement [over the stability pact] is already reached," said Mr Bruton, dismissing the remaining 2 per cent as "procedural matters". At the core of these is the question of who should decide whether a member country should be given a cop-out in times of economic crisis.

Under the "stability pact" governments should keep their budget deficits within tight confines, and failure would automatically trigger punitive fines. Countries in "severe recession", however, can be excused. But it remains to be resolved who defines "severe recession" - the government concerned or Europe's independent central bank.

That is quite a "procedural matter", but Mr Bruton hinted that a workable fudge was within sight. More difficult will be to reconcile differences over the community's political future. On Thursday, the Irish presidency published its summit proposals, which couched the reforms it was seeking in deliberately vague terms. The final version of the joint Franco-German proposals, to be unveiled on Monday, is expected to call for "flexible co-operation" and "qualified majority voting"; issues that divide the EU.

"Flexible co-operation" would allow France, Germany and their allies to build a "core Europe" while relegating the likes of Britain to a second division. Mr Bruton conceded that an agreement on flexible co- operation was even more elusive than the stability pact.

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