Europe bets on single currency

Britain can stay out of monetary union if it wants, but by 1999 seven c ountries will be using ecus

WALK into an Amsterdam cinema five years from now, and the chances are you will buy your ticket not with guilders but ecus. Go to the Munich beer festival, and the waiters will expect payment in ecus, not in marks. Skiing in Grenoble, buying chocolates in Bruges or sightseeing in Vienna - it will all be done in ecus, not in today's national currencies. For whatever the British government might have to say about it, a single European currency is almost certain to becirculating at the start of the next century - albeit in no more than seven countries.

An era of change is dawning in the European Union that will transform the western half of the continent as profoundly as the eastern half was transformed in 1989. That change is coming whether or not Britain chooses to be part of it, and the result will be an EU that looks very different from the present loose union of 15 countries.

The most important change will be the creation of a single currency and of supranational political institutions to accompany it. This is likely to happen not in 1997, the earliest date envisaged in the Maastricht treaty, but in 1999, the second target date, because two years from now not enough countries will meet the treaty's conditions for forming a single currency.

The new political institutions will not mean the emergence of a European super-state governed from Brussels, or a federal United States of Europe, but they will mean considerable pooling of sovereignty by those countries involved in monetary union.

One possibility is a council of ministers, and a parliamentary authority, made up of delegates from individual countries according to the size of their populations. They would supervise economic policy in the single-currency area, but leave important powers to national or local governments.

Inevitably, many EU states will be left out of these arrangements, because they lack either the economic strength or political will to be part of them. According to a senior French government source, France believes that seven countries - Austria, Belgium, Finland, France, Germany, Luxembourg and the Netherlands - will be able to go ahead with monetary and political union.

Some European Commission officials say Ireland is a likelier candidate than Finland. But they agree that Britain and Denmark will not initially take part, having secured opt-outs under the Maastricht treaty, and that economic weakness will exclude Greece, Italy, Portugal, Spain and Sweden for the time being.

The EU may therefore have an inner core, dominated by France and Germany; a middle section, led by countries such as Italy and Spain that aspire to the inner core but must wait for economic reasons; and an outer skin, possibly consisting of Britain alone. By 2001, a fourth and fifth layer will probably take shape, made up of new EU members - the Czech Republic, Hungary, Poland and Slovakia - and EU applicants such as Cyprus, Estonia, Latvia, Lithuania, Malta and Slovenia.

European central bankers, including Hans Tietmeyer of Germany's Bundesbank and Eddie George of the Bank of England, have warned that monetary union is a complicated process that could cause immense political upheaval and economic damage if not thoroughlyprepared in advance. The bankers insist that any country joining a single currency must fulfil the strict conditions on budget deficits, national debts, interest rates and inflation stipulated in the Maastricht treaty.

Mr George, speaking in Paris last week, added that the EU should not be deluded into thinking that monetary union was feasible in the long term just because Europe's current phase of economic growth was helping certain countries to meet the Maastricht conditions. Major structural differences separated Europe's economies, and "it would be very dangerous to move to monetary union in these circumstances", he said.

What this ignores, however, is the overwhelming will for monetary and political union among politicians in France and Germany. They take the view that this momentous project has become essential now that Germany is united and the EU is poised to admit a group of relatively weak countries on Germany's eastern borders.

French politicians, in particular, say that containment of German power and of national European rivalries - two of the motives behind the foundation of the original European Economic Community in 1957 - cannot be guaranteed if EU institutions are left as loose as they are now. The only answer is monetary and political union among those countries with the necessary political commitment and economic strength.

Any British attempt to veto the project, and to turn the EU into a simple free-trade area, is doomed to failure, EU officials say. It would merely prompt the "inner core" countries to sign a new contract among themselves for monetary and political union.

However, the EU's evolution into an onion-like organisation of cores and skins will not occur without arguments. One serious flashpoint may be Belgium.

Perhaps the most ardently integrationist country in Europe, Belgium is virtually guaranteed a place in the "inner core" for political reasons. But economists say it is unlikely that Belgium will meet the Maastricht criteria for a single currency even by 1999.

The treaty allows an exception for countries deemed to be approaching the Maastricht targets, but if Belgium receives favour-able treatment in this way then countries excluded from the "inner core", notably Italy and Spain, will be furious. They could seek to block internal EU reform on a host of other fronts - as Spain did recently, when threatening to delay the accession of Austria, Finland and Norway unless it won its way on fishing rights. The Bundesbank and German parliament may object if the Maastricht rules are bent too much to suit Belgium. In the end, however, the political momentum behind monetary union is so strong that, if the ecu fails to make its debut about 2000, it may be counted as the biggest political disaster of post-war western Europe.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs General

Guru Careers: Dining Room Head Chef

£32K: Guru Careers: We are seeking a Dining Room Head Chef to work for one of ...

Guru Careers: Pastry Sous Chef / Experienced Pastry Chef

£27K: Guru Careers: We are seeking a Pastry Sous Chef / Experienced Pastry Che...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Are you a recent graduate loo...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine