Fault line undermines fragile euro
Tuesday 10 June 1997
Hurried attempts were last night being launched to patch over rift, but the question remains: could the divisions exposed yesterday re-emerge and push the project off course?
The risk of rupture over the design of economic and monetary union (Emu) has always been highest between France and Germany, where differences in the philosophy of the euro-zone run deep.
Germany has consistently demanded that, in return for its willingness to give up a strong mark, other member states must accept the stiffest rules of fiscal discipline, in order to give the euro the best chance of being as strong as the mark.
Only by demonstrating that other member states are prepared to accept German-style monetary discipline could Helmut Kohl, the German Chancellor, hope to persuade the German people that it was safe to sacrifice their currency.
The Maastricht rules for the euro are set, largely to German standards. And in November 1995, Theo Waigel, the German Finance Minister, underpinned Maastricht by proposing a "stability pact" which would ensure that countries joining Emu would maintain the same discipline after the 1999 launch.
As long as the Gaullists remained in power in France, Germany has, largely, been able to have its way over the design of the Emu rule-book.
Jacques Chirac, the French President, has always sought ways to soften Germany's monetary rigour, and has backed some form of political government to counter control by the future European Central Bank.
Germany's own difficulties in meeting the Maastricht criteria, seen most notably during the recent debacle over plans to re-value German gold, have strengthened the case for a more "flexible" approach to the Maastricht criteria.
The victory of the French Socialists, however, was always sure to bring France into a head-on confrontation with Germany over the Maastricht rules and the terms of the stability pact.
During the French election campaign, Lionel Jospin, the new Prime Minister, made clear that he would refuse to implement the austerity measures demanded by the Maastricht rules, thereby clearly opening the door to the "soft euro" which Bonn has hitherto abhorred.
Mr Jospin promised to create 700,000 French jobs and to reduce the working week to 35 hours, raising questions about whether France would have any chance at all of meeting the Maastricht deficit criteria under socialist rule.
On the campaign trail, Mr Jospin also condemned the entire stability pact as "absurd", suggesting he would seek to throw out the entire set of rules should he come to power. However, a senior European minister confirmed yesterday that Mr Jospin had privately appealed for a "form of words" on Emu which would enable him to keep France on track for the launch, while demonstrating to French voters that he had not betrayed them just one week after his victory.
And some observers saw yesterday's announcement from Dominique Strauss- Kahn, the new French Finance Minister, that the terms of the pact had to be re-worked, as a climb-down from the hard line struck by his party during the campaign.
Nevertheless, France's adamant refusal to accept the stability pact terms yesterday, has broken a taboo. To date, no member state - other than Britain - has taken such a strong stance against any elements of Emu architecture.
Whatever magic is now performed by the Dutch presidency, ahead of next week's Amsterdam summit, no "form of words" will be enough to accommodate French demands for establishing a political counter-weight to the European Central Bank. Such an initiative will demand weeks or months of bruising negotiation, rather than days.
Germany was cautious in its first response to French demands yesterday. But it seems highly unlikely that Bonn will be able to swallow any further weakening of its prized Maastricht rules or stability pact. Patching over yesterday's row will not heal the rift.
- 1 Green village to be bulldozed and mined for lignite in Germany's quest for non-nuclear fuel
- 2 HeForShe campaign: Iceland to follow up Emma Watson speech with UN women's rights conference – for men only
- 3 Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
- 4 Teenagers irritable because early school hours mess with their biological clocks
- 5 Now we know whose fault it is if you end up being murdered in Thailand
Isis could become 'world’s first truly terrorist state' and bomb UK with nuclear and chemical weapons, Theresa May warns
Car tax disc changes: Five facts you never knew about your (almost obsolete) tax disc
Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
Isis an hour away from Baghdad - with no sign of Iraq army being able to make a successful counter-attack
The Aral Sea: Nasa pictures show how what was once the fourth largest lake in the world has become almost completely dry
Isis, we are told, is a 'clear and dangerous threat to our way of life'. I’m sorry, but I just don’t buy it
Exclusive: 'Putin's Russia has been my biggest regret,' says Nato's outgoing Secretary General
The Osborne Ultimatum: Chancellor’s benefits freeze bombshell will affect ten million households
There’s no excuse for Dave Lee Travis’s behaviour, but we need to keep a sense of proportion
Should gay sex be illegal? 16% of Britons think so
Mark Reckless becomes second Tory MP to defect to Ukip in a month
- < Previous
- Next >
£100 - £110 per day + Plus travel scheme: Randstad Education Cardiff: The Job:...
£40000 - £50000 Per Annum Excellent benefits: Clearwater People Solutions Ltd:...
£100 - £105 per day + plus Travel Scheme: Randstad Education Cardiff: The Job:...
£100 - £125 per day: Randstad Education Chelmsford: Would you like to work in ...