French want new look at deal on euro

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The Independent Online
The new French government will this weekend light a fuse under the single currency by calling for a radical rethink of the agreed rule-book for the euro.

So far-reaching are the demands that the issue of monetary union is now expected to overshadow the European summit in Amsterdam in 10 days' time.

Some European leaders were even predicting last night that the summit, when Europe hopes to sign a new treaty, may have to be delayed. Lionel Jospin, the new Socialist French Prime Minister, let it be known at this week's European Socialist congress in the Swedish city of Malmo that he will seek to re-open the "stability pact", the detailed plan for governing the euro zone.

The pact, designed to German lines, was agreed after intensive negotiations at the Dublin summit in December and was due to receive final endorsement from all 15 heads of government at Amsterdam.

Mr Jospin now wants to renegotiate the pact in order to give greater emphasis to jobs and growth. France is also canvassing plans for a change to the Maastricht rules to create a powerful economic "government" which could set economic policy for Europe and act as a counterweight to the future European central bank. The ideas are expected to be raised at a dinner to be attended by European finance ministers in Luxembourg tomorrow.

Speaking in Malmo, Mr Jospin refused to comment directly on his ideas for the stability pact but stressed repeatedly the need for European monetary union to concentrate on creating jobs and promoting investment.

He also pointedly refused to endorse current Emu rules or its timetable. "On Emu we do not know what is going to happen. We must clarify the prospects there."

Any attempt by France to re-write the stability pact would be fiercely resisted by Germany, and a clash looks likely at a Franco-German summit next week, just three days before the Amsterdam meeting.

Germany has presented the stability pact to its public as a bulwark against a weak euro. Under the pact, countries who do not obey strict economic rules after the euro launch would be subject to a system of fines.

In particular, Germany would resist attempts to build an economic government which could undermine the independence of the Central Bank.

Theo Waigel, the German finance minister and chief architect of the pact, has already suffered a dent in credibility after his botched attempts to revalue German gold reserves in order to help the country meet the Maastrict criteria.

Mr Jospin is understood to be planning to call for the re-writing of the key article 103 in the Maastrict treaty in order to establish an economic government consisting of Europe's ministers for financial and social affairs.

French government sources say Mr Jospin is also considering a new borrowing programme to promote European reconstruction.