New Franco-German ideas for such a body are already causing intense anxiety in the Treasury. If Britain does not join the single currency, the Government would be excluded from the new club, which will have wide-ranging powers to set economic policy for the euro-zone.
Although no formal proposals are likely to be set out at Dublin, discussions on a joint letter setting out the idea were underway in Paris and Bonn this week. The moves by France and Germany to develop their plans will fuel fears among British pro-Europeans that if Britain does not join the single currency it will be left on the sidelines.
New ideas will also be proposed in Dublin to extend the so-called "stability pact", the controversial system of rules for running the euro-zone, which is currently under discussion, into a "stability-and-growth pact". The intention is to reassure the public that the single currency means growth and jobs, as well as strict economic discipline.
The proposals from France and Germany are the latest indication of the serious preparation which is underway for the launch of the euro. Outstanding differences between France and Germany over how the single currency's rules and sanctions should be applied are still not settled. However, sources in Paris and Bonn last night expected that the dispute would be solved at a meeting of European finance ministers today, ahead of the full summit.
Once the stability-pact rules have been finalised, attention will switch to the more sensitive question of how economic policy will be agreed and what body should enforce stability rules. It is largely agreed in Bonn and Paris that decisions on enforcement of the stability pact would be taken by European finance ministers, as set out under the Maastricht treaty.
However, the more radical plan is to establish an informal policy-making body, which would meet separately from the finance ministers, and would agree in advance how the stability pact should be enforced. The new club would also discuss exchange-rate policy for the euro-zone and other crucial aspects of economic policy. It would constitute an inner circle, from which Britain would be excluded if it chose not to join the single currency.
The idea of creating an informal political group, which would probably consist of heads of government from countries inside the single currency, has already been floated by Jean Arthuis, the French finance minister. He discussed the idea with Kenneth Clarke, the Chancellor, during the Anglo-French summit last month, when Mr Clarke voiced strong opposition.
The plans, which are carefully guarded, are sensitive for all countries who may be left out of monetary union in the first phase. Should a body be established for "in" countries only, suspicion will grow of a new "hard- core" Europe. The European Commission is also strongly opposed to the setting up of such a body which would be outside the rules of the Maastricht treaty. But France has long argued that Europe's economic policy must not be left solely in the hands of the future European Central Bank, but must be given a political counter-weight.
Any disagreements apart, the European finance ministers are determined to use the Dublin summit to proclaim the success of the stability negotiations. The pact is widely viewed as the foundation stone for monetary union.Reuse content