Good ship 'Emu' wrenched back on course

Under the deep blue skies of the Spanish coast, Europe's future seemed suddenly so clear. Monetary union must go ahead, decided finance ministers, meeting in Valencia at the weekend.

Let nobody be in any doubt, the ministers declared, the good ship Emu is well on course to reach safe harbour by 1999, and national currencies will be replaced by a single European currency which will probably be called the Euro.

The meeting was another turning point for European monetary union. The ministers were under pressure to consider a delay, following signs that Germany might be wavering at the prospect of replacing the strong mark with an untested single currency. The Franco-German alliance was fracturing, amid fears that even France might not make the economic grade for Emu, and opinion polls across Europe have shown growing public doubt.

The Valencia meeting left no question about the seriousness of European governments' intention to proceed. It was as if the turmoil in the financial market had never happened and as if the doubts of the Germans had suddenly been dispelled. "There will be time" to convince the people and "there will be time" to quell the fears, chimed ministers, as the noise of public protest lapped away across the sea.

The real significance of the meeting, however, remains unclear. According to German sources, Chancellor Helmut Kohl and Theo Waigel, his finance minister, met last week to discuss the possibility of a delay, but rejected the idea on the grounds that it would involve re-writing the Maastricht treaty. In an interview in Der Spiegel, to be published today, Mr Kohl appears to raise new doubts by saying a delay of two years would "not be the end of the world''.

So was the determination of ministers to go ahead as planned an act of brave political leadership? Or did the Spanish sun just blind them to the wave of serious doubts which still threatened to push their ship off course?

Details of the timetable, and economic criteria, were clearly reaffirmed. In December this year, heads of government will make the final ruling on the currency's name, and settle practical plans for the changeover, the Valencia meeting decided. In January next year the European Commission will launch an advertising campaign to teach the public of Europe how the single currency will work. By the end of 1997 all member states who are eligible to join, and wish to do so, must have their economies under tight control. The decisions on which countries have met the economic tests - including reducing public debt and budget deficits - will be based on 1997 economic results, and will be made as early in 1998 as possible.

On 1 January 1999, monetary union will begin with the locking of exchange rates, and the launch of a single monetary policy. After three years Euro notes and coins will start to circulate. For six months national currencies will circulate in parallel with Euro-money, but will then cease to be legal tender.

But the trouble is that the more Europe's ministers set out detailed plans for monetary union the more likely they are to fuel public doubt. Recent disputes have lulled the public into believing that monetary union may never happen. So arcane has the Emu debate been so far, so weighted down with dogma, that the European public has not been brought face-to- face with the reality of losing familiar notes and coins. Once the currency is finally named and the education campaign starts, however, the public will start to give its verdict: the signs suggest that it might well be "no".

Britain's scepticism is well known, and at Valencia Kenneth Clarke, the Chancellor of the Exchequer, reasserted Britain's right to exercise its opt-out. However, whatever timetables Valencia may have agreed, there is no certainty that even the pro-European Mr Kohl will be able to sell the single currency to his voters. Mr Waigel, who raised questions 10 days ago, was giving voice to mounting German fears about sinking the mark into a single currency. A German poll published before the Valencia meeting showed that 45 per cent of Germans would vote against monetary union and only 31 per cent would support it.

The issue of monetary union, in the European public mind, is inextricably linked with a wider debate about more political power-sharing for the EU, which comes to a head at next year's Inter-Governmental Conference. For now, governments appear confused and divided about Europe's political future. If these divisions are not resolved before next year's IGC, the confusion will only heighten public fear about monetary union.

In France there has been little public debate on the single currency as yet. However, President Jacques Chirac knows that if he is to act on the declarations of Valencia he must swiftly impose stringent measures to cut the budget deficit sufficiently to meet the Emu criteria.

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