As the European Union kicks off its two-day summit in Cannes this morning, what are the chances that a single currency, even if limited to five or six countries, will be launched before the end of the century? It is unlikely the 15 heads of state and government on the French Riviera will provide an answer.
European Monetary Union, or Emu, is a bird that will be trussed up and kept out of sight for most of the summit. The issue has the potential to touch off passionate arguments - not just between Britain and other EU members, but among the other 14 themselves - and so the ministers who prepare EU summits decided not to give the single currency centre stage at Cannes.
But the project is not on hold. Talks on monetary union have never been so intense as in the last six months. Concrete proposals for a super- currency have been put forward. They differ in details, but all governments take them seriously. The political will behind the project is immense.
The difference is that governments appreciate better the economic and political obstacles to monetary union. Hence, EU finance ministers felt obliged in Luxembourg last week to bury the Commission's hope that the project could be started in 1997, the first target date set in the Maastricht treaty. The ministers said too few countries will meet the Maastricht conditions on such things as government debts and interest rates.
This was a slap in the face for the Commission, but it does not imply that the new Gaullist leaders of France or the German government and the Bundesbank oppose starting the single currency in 1999, the second date mentioned in Maastricht. The French and Germans are committed to the final goal.
The budget unveiled last week in Paris by France's Prime Minister, Alain Juppe, included tax increases and spending cuts explicitly intended to ensure France can sign up to monetary union in 1999. If a single currency is to start by then, a huge amount will depend on the success of the French government's economic programme.
Should French unemployment, now at 12.2 per cent, remain high, or should it prove impossible to reduce interest rates without weakening the franc against the mark, monetary union may be delayed.
Mr Chirac wants the EU to analyse the consequences of having some countries in a single currency and others outside.
His fear is that France could suffer a permanent loss of markets in major trade partners such as Britain, Italy and Spain that are unlikely to join a monetary union in 1999 and whose currencies will be free to fall against the new Eurocurrency.
The French economy has remained robustly competitive in the last three years, as the franc has risen strongly against the pound, lira and peseta. But the French want to make sure that a single currency does not wreak revenge on its creators.
As for Germany, it is one of only three countries that already meet the debt and deficit conditions. The others are Ireland and Luxembourg. From the German perspective, a single currency is desirable in principle. Doubts concern the ability of many EU members to meet the Maastricht criteria, and the willingness of some countries, above all France, to accept a degree of political union in return for enjoying the benefits of a mark-based single currency.
There are differences between France and Germany on how much power should go to pan-EU institutions, notably the European Parliament. On the powers of national parliaments and retention of a veto, France is taking a stance that may prove too strong to lure Germany into a single currency.
Political pressure is certain in the next three years from countries such as Belgium and Italy, eager to be included in a currency union even if their economic performances suggest they should wait. Even in 1996, the government debts of Belgium and Italy are expected to be more than double the Maastricht target of 60 per cent of Gross Domestic Product. Some progress may be made by 1999.
But can Euro-enthusiastic Belgium be excluded from monetary union? And if Belgium is included, is it fair to exclude Italy? Much depends on whether the debate is won bythose who argue that at least Belgium or Italy are making progress towards the targets.
Italy, Spain, Portugal and Greece, representing the EU's southern tier, are resisting the suggestion that they should be kept in a second-class waiting room while richer northern states form an exclusive club.
It is conceivable that the southern states will succeed at the EU's inter- governmental conference, starting next year, in putting off the Emu launch date. The EU's richest states may consider that the alternative prospect of a "northern secession" is too dangerous, in that it risks testing EU harmony.
The two chambers of Germany's parliament have reserved the right to reject any deal on monetary union that weakens the conditions for would-be members. This could be the most serious impediment of all to a single currency launch in 1999. German political attitudes and French economic performance are the keys to whether Emu's flight plan goes according to schedule.Reuse content