Kohl and Chirac gloss over divisions on EU

Leaders fail to agree on details of stability pact

Germany and France yesterday strained to maintain a common front ahead of Friday's European Union summit, producing a flurry of initiatives on the reform of the community, and a deafening silence on the issues that still divide them.

Although almost the entire French cabinet made the trip to Nuremberg, their day-long consultations with German opposite numbers failed to resolve the simmering row over the fate of Europe's new currency. A 10-page letter signed by Chancellor Helmut Kohl and President Jacques Chirac, to be delivered to Dublin on the eve of the summit, made no mention of monetary union, and remained vague over the reform of the EU's decision-making process.

To the very end, President Chirac insisted Europe's economy should not be subordinated to a bank based in Frankfurt, built on the German model. While conceding that the new monetary institution should be independent, the French President said that there should also be "a corresponding authority vested with political power opposite the central bank".

France, as well as some opposition politicians in Germany, are worried that the unelected technocrats employed by the Son of Bundesbank, to be born in 1999, would dictate the economy of the continent, rendering national governments superfluous. Germany has taken some French objections on board, but the compromise formula fudges the question of accountability. There will be a council consisting of member governments, though its exact role is yet to be spelt out.

There is still no meeting of minds, however, on the most divisive proposal: the "stability pact", or, in French parlance, the "stability council". "The stability pact should secure the stability of the future currency," Mr Kohl parroted yesterday. "Neither France nor Germany desires a soft money," he said. In response to accusations emanating from Downing Street, that France and Germany wanted a "soft currency", the Chancellor warned: "I advise everybody to do their homework."

President Chirac came to Nuremberg opposing the legalistic German solution that would punish profligate governments with stiff fines, and evidently left empty-handed.

A compromise of sorts will be tabled at Thursday's meeting of European finance ministers in Brussels, but it is unlikely to address the question of who should decide when such fines are to be levied. The Germans make allowances for a country whose economy has shrunk by 2 per cent in a given year, but despite strenuous efforts, France never earned that distinction in the past 50 years.

To make up for their disagreements, the two countries trumpeted a list of proposals on which they could concur. The joint letter emphasises France and Germany's commitment to a Europe-wide police authority to fight organised crime. There "should be" more co-operation among the judicial authorities of member-states, and the battle against crime should be rejoined by a continent-wide agency, Europol. This would imply co-ordination of immigration policy and police work, a move Britain strongly opposes.

The Franco-German vision is clearest about defence and foreign affairs. "The European Council determines the principles and general orientation of foreign policy and of common security policy," the letter states. This body, consisting of ministers of member-states, "could" also define the priorities, "which implies that member-states abstain from initiatives that are contrary" to these common priorities.