Leaders close ranks over euro wrangle

WIDESPREAD cynicism about the fudged deal to select the first president of the European Central Bank was brushed aside by political leaders yesterday as they closed ranks, in public at any rate, to play down the significance of the Franco- German wrangle.

The continental press gave the deal an overwhelming thumbs down and members of the European Parliament warned it could be illegal under the terms of the Maastricht treaty. Wim Duisenberg, the majority-backed candidate, was forced to declare he would stand aside after four years of the eight-year term of office to allow his French rival Jean Claude Trichet to take over in 2002. Mr Trichet will serve a full eight years, the European Commission confirmed yesterday.

The deal was done after France wielded its veto during an eleven hour stand-off which marred the weekend launch of the single currency and sparked fears that the Euro would be weakened.

But relative calm in the financial markets where the German mark and other European currencies stabilised against the dollar appeared to vindicate the claim that, although a public relations fiasco, the compromise caused less alarm than anticipated about the euro's credibility.

The German Chancellor, Helmut Kohl, defended the outcome in Bonn yesterday, pointing out that Mr Duisenberg was appointed for eight years and the decision to go after four was his own. "It was his decision to leave early. I must respect it. It was a compromise."

There was no serious threat to the Franco-German alliance either, he insisted. "With friends you can talk about everything, even if you disagree. This will change nothing in the German-French friendship."

The German Finance Minister, Theo Waigel, who during the summit took a tougher line against the French than Mr Kohl, yesterday dismissed as "absolute rubbish" rumours that the Bundesbank president, Hans Tietmeyer, had threatened to resign over the deal.

The Dutch Prime Minister, Wim Kok, also defended the deal against Opposition accusations he himself had lost credibility with his electorate, who go to the polls tomorrow, while the Belgian Prime Minister, Jean Luc Dehaene, said the spat would be forgotten within weeks. Mr Dehaene had earlier voiced fury at the way in which Tony Blair handled the talks but said such clashes were inevitable from time to time.

Furious European Parliamentarians, however, threatened to expose any illegality in the deal during hearings on all six appointments to the ECB executive board this week. Mr Duisenberg faces cross- examination by the parliament's monetary affairs committee for three hours on Thursday morning.

Pauline Green, the leader of the 200-strong Socialist group in the assembly, who said it was unacceptable that "poor old Duisenberg" had been forced to pretend he would resign for personal reasons, said there was growing concern about the implications of the deal. It means Mr Trichet will head the bank for a full eight-year term. Ms Green, who has asked the parliament's legal service to vet the agreement ahead of the hearings, said the deal meant the top bank job is now "stitched up" for twelve years rather than eight.