Kohl and Juppe act to steady the franc

Click to follow
Germany and France sought to calm nerves over the planned European single currency yesterday by insisting that the present mark-franc exchange rate does not need to be changed.

The statement, from German Chancellor Helmut Kohl and France's Prime Minister, Alain Juppe, was designed to quell speculation that the franc might be devalued before the scheduled launch of the euro in January 1999.

Fresh tensions over monetary union had broken out on Wednesday when Valery Giscard d'Estaing, a former French president, proposed a sharp devaluation of the franc ahead of monetary union. Heightening the sense of drama, Italy's Prime Minister, Romano Prodi, said he would resign if his country failed to qualify.

Their comments demonstrated that for all 15 European Union member-states, the stakes of monetary union are growing larger the closer the EU moves to the moment of truth in January 1999.

In practice, the crunch year for most EU governments may be less than six weeks away, for it is partly on the basis of their economic performance in 1997 that countries will be judged to have met - or missed - the Maastricht conditions for participating in monetary union from the start.

Though Mr Giscard d'Estaing is not in the French government, his devaluation proposal reflected the views of a number of French politicians. In Germany, however, there is likely to be little welcome for any move leading to a stronger mark and greater strains on German competitiveness.

Mr Prodi's offer to resign if Italy fails to be a founder-member of the euro was, in the eyes of many, a sore temptation of fate.

He made the offer only a day after his government was widely criticised for putting forward emergency tax proposals which are supposed to ensure Italian participation in monetary union in 1999, but which may achieve precisely the opposite.