Dollar threat to European convergence

Turmoil in the financial markets could jeopardise EMU's start date, according to some of The Independent's experts. Instability in the Far East could prompt a fall in the dollar that could, in turn, threaten European convergence.

Michael Lewis of Deutsche Morgan Grenfell said: "The collapse of the dollar is one of the key things that could upset EMU at this stage. A weak dollar has always coincided with currency problems in Europe."

Other experts disagreed, though. Richard Reid of UBS thought increased market instability could improve EMU's prospects. "It will be more difficult for Germany to pursue an aggressive interest rate policy because of turmoil in the financial markets," he explained.

France's decision to pit Jean-Claude Trichet, governor of the Bank of France, against Germany's favoured candidate, Dutchman Wim Duisenberg, to head the European Central Bank (ECB) has prompted concern about Franco-German rifts.

Stephen King of HSBC James Capel said: "The key issue is not whether Mr Trichet becomes head of the ECB, but what the French want for withdrawing his nomination."