When Europe's leaders conceived Economic and Monetary Union at Maastricht, they attempted to foresee every obstacle in the future path of their creation. But one eventuality that nobody predicted may yet determine how Europe's single currency functions - the appointment of Oskar Lafontaine as Germany's finance minister.
Famously described by Denis Healey as "a cross between Rosa Luxemburg and Radio Luxembourg", Mr Lafontaine has commandeered the political agenda inEurope since he entered office in October. Unlike Germany's Chancellor, Gerhard Schroeder, Mr Lafontaine is a politician driven by ideology who relishes a polemical punch-up.
After years as the bogey-man of German business, it came as no surprise to anyone when the new finance minister made unfriendly noises to the bosses. But when he took on both the Bundesbank and the newly-created European Central Bank (ECB), even his supporters wondered if "Red Oskar" had not gone a little too far.
Mr Lafontaine blames the Bundesbank's high interest rates for Germany's record unemployment level of more than four million and he told the bank's president, Hans Tietmeyer, that it was time for a cut. Mr Tietmeyer, who owes his entire career to the patronage of the former Chancellor, Dr Helmut Kohl, reminded the finance minister that the Bundesbank is independent and told him, more or less, to mind his own business.
Nothing could be further from Mr Lafontaine's nature, so he turned his attention to the ECB and its president, Wim Duisenberg. The ECB has even more independence than the Bundesbank and its sole criterion in setting interest rates is price stability - in other words, keeping inflation low.
This is not good enough for Mr Lafontaine, who called on Mr Duisenberg and his colleagues to take economic growth and unemployment into consideration as well when setting rates for the euro area. He also suggested that Europe's elected politicians should have an input into decisions made by the ECB.
Mr Duisenberg reacted at first like a Victorian lady who had just been approached with an improper suggestion. But he soon discovered that Mr Lafontaine was articulating a widely shared anxiety about the remoteness and unaccountability of the ECB, which will not publish forecasts or minutes of its meetings and is only obliged to brief the European Parliament about its activities once a year.
Within days of Mr Lafontaine's intervention, Mr Duisenberg was promising to come and see the European Parliament more often and, at the beginning of December, interest rates in all but one euro-participating state came down to 3 per cent.
Mr Duisenberg, of course, insists that the cut in rates had nothing to do with pressure from the German finance minister, which he claims was counter-productive. The central banker likes to tell a story about his tenure as head of the Dutch central bank when he and his board decided on a Tuesday to cut interest rates on Thursday:
"On Wednesday, the finance minister asked me: isn't it time to cut interest rates at last? I had to tell him: we had decided to do it, but now we won't sink them."
The story certainly testifies to Mr Duisenberg's commitment to his own independence but it also casts doubt on the soundness of his judgment. After all, if an interest rate cut is justified, how can the finance minister's approval make it less valid?
Mr Lafontaine has no designs on the independence of the ECB but he is determined to puncture Mr Duisenberg's authority as the architect of economic policy in euro states. Mr Lafontaine and his allies believe that the euro's biggest problem is that it was conceived during the height of the neo-liberal hegemony over economic thought.
He intends to work with other centre-left governments to ensure that the introduction of the euro is accompanied by harmonisation of economic and, most controversially, tax policies. Despite the outrage his remarks provoke, Mr Lafontaine is convinced that he is winning the argument - both on interest rates and tax.
If he succeeds, the leaders who conceived EMU in 1991 may find that their long-awaited offspring is not at all what they expected or wished for.
