EMU wrangle ends in victory for all

BOTH France and Germany were claiming victory last night in their dispute over the Stability Pact governing Economic and Monetary Union after the compromise reached at the Amsterdam summit.

Germany's Finance Minister, Mr Theo Waigel, insisted that because the Stability Pact remained unchanged and no extra spending was agreed for job creation programmes, Bonn had achieved all its aims.

"I am very satisfied with the result. The European Council has agreed the Stability Pact without changes," he said.

But French officials were also expressing satisfaction, arguing that Paris had effected a sea change within the EU, putting the interests of ordinary citizens ahead of those of bankers and businessmen.

A spokesman for the Prime Minister, Mr Lionel Jospin, suggested the resolution on employment marked the beginning of the end of the unpopular austerity measures associated with EMU's introduction.

"This is only the beginning. We have begun to reverse the trend, we have loosened the noose," he said.

Germany is clearly relieved at the outcome of the dispute, its first major skirmish with the new Socialist government in Paris. But officials were concerned over the future of the FrancoGerman relationship and the poor personal chemistry between the Chancellor, Dr Helmut Kohl, and Mr Jospin.

Dr Kohl, for whom personal friendship plays an unusually strong political role, is understood to have offended Mr Jospin by giving a press conference following a meeting with President Jacques Chirac in Paris during the French election. The French Socialists interpreted the move as a gesture of support for their conservative rivals.

Mr Waigel reminded reporters in Amsterdam yesterday that Bonn wrestled strenuously with the previous French government in Dublin when the Stability Pact was being negotiated. But Germany's currently fraught relationship with France contrasts with the warmth displayed between Bonn and London. British off EMU compromise and stressing their own supportive role.

While French officials stressed the significance of the resolution on employment, claiming that it enjoyed equal status with the agreement of the Stability Pact, Mr Waigel sought to play down the significance, of the jobs plan.

"Its quite obvious that (here is a major difference between something that is discussed for a year and a half and given the force of EU law and, on the other hand, something we put together over the past few days," he said.

Mr Waigel insisted the proposal to encourage the European Investment Bank to support small and medium sized businesses did not imply a system of concessions or artificially low interest rates.

Yesterday's agreement may yet prove inadequate to satisfy French public opinion but Mr Waigel was confident enough of the German popular response to leave Amsterdam a day early.

"Stability begins at home, so I hope you'll understand that I am returning to Bonn now," he said.