The future of European monetary union hung in the balance last night as European Union finance ministers gathered for crisis talks in Valencia amid growing speculation that they may be forced to delay the launch beyond the target date of 1999.
After 10 days of intense dispute over whether EMU is achievable, the choices are stark. The finance ministers must either clear the air by producing concrete evidence of a new commitment to forge ahead - deciding a name for the currency, for example; or they must acknowledge the need for a delay, thereby triggering what could become the biggest political reversal in EU history.
New controversy broke out on the eve of the Valencia meeting as reports surfaced that Theo Waigel, the German Finance Minister, had called for a delay of "one to three years".
It was Mr Waigel who first sparked the latest disarray, ahead of the EU summit at Majorca last weekend, when he raised questions about the 1999 target date. Then he questioned the ability of Italy and Belgium to meet the necessary economic tests in time.
Yesterday, the Frankfurter Rundschau reported that Mr Waigel told a closed meeting of the Bundestag (German parliament) finance committee nine days ago that the EMU timetable in the Maastricht treaty was "not a constraint". Mr Waigel yesterday denied the report, but the paper also quoted anonymous sources, present at the meeting, as saying that other EU countries had agreed some time ago that the timetable could be delayed.
As Kenneth Clarke, the Chancellor, arrived in Valencia last night, he fuelled speculation about a delay, saying doubts were growing over the 1999 target date.
"We have been working towards that date," he said. "I have always said it is a question of if and when. Now people outside the circle involved are realising that 1999 is not a certain date."
In the run-up to the meeting, Helmut Kohl, the German Chancellor, and Jacques Chirac, the French President, have attempted to reaffirm their commitment to proceed with monetary union, and the European Commission has insisted there can be no going back because the 1999 target date is in the Maastricht treaty. But the doubts have not been dispelled, and yesterday Commission officials were "furious" at the reports that Mr Waigel had dropped a new bombshell.
The consequences of delaying the launch of monetary union cannot be underestimated. A delay would involve rewriting the Maastricht treaty, which would have to be ratified by national parliaments. The doubt would lead to new ferment in the markets and deepen public scepticism about the EMU project. The reversal would be seen on the continent as a sign of deep division and disarray at the heart of the EU.
Monetary union was originally a Franco-German dream, and to question it now would seriously undermine the union's central Franco-German axis. As a result, the major political reforms on the agenda for next year and the plans to enlarge the union to the East would be thrown into disarray. The slow-down would clearly be welcomed by John Major, who has already exploited the new row to gain political capital.
The Chancellor said this weekend's talks were aimed at working out a relationship between the inner core of countries, implicitly including Britain, who could meet the convergence criteria in time, and the rest who would be outside.