Kohl and Chirac fail to reach consensus on EMU regulations

THE prospect of agreement on the rules governing a single currency before Friday's summit in Dublin receded last night after Chancellor Helmut Kohl and President Jacques Chirac failed to agree a joint approach.

The two leaders, meeting in Nuremberg, published a letter addressed to the Taoiseach, Mr Bruton, in his role as chairman of the European Council outlining their hopes for next year's InterGovernmental Conference.

Although the letter includes radical proposals for open borders within Europe, a common policy on asylum and immigration and the fight against crime, failure to agree on European Monetary Union betrays deep divisions between the two. In a press conference after the summit, Dr Kohl insisted that French and German finance ministers still hope to agree on a joint position before Thursday's meeting of EU finance ministers in Dublin.

The Franco German proposals on justice and interior affairs include a proposal to expand the Europol police agency into what Dr Kohl once described as a "European FBI".

On foreign policy, the letter calls for a single figure to represent the EU on foreign and security policy and for the publication of a timetable outlining integration of the EU and the Western European Union defence pact.

The disagreement over the EMU stability pact goes to the heart of the Franco German relationship and touches on sensitive nerves on both sides. French politicians fear that, by introducing a strict stability pact, Germany hopes to force its EU partners to accept a "German euro" and to impose Bundesbank discipline on Europe.

In an interview with the Financial Times yesterday, the French, Prime Minister, Mr Alain Juppe, poured scorn on the suggestion that the new European Central Bank (ECB) should have the influence that the Bundesbank now enjoys in Germany.

We don't want all decisions on economic, budgetary, fiscal and monetary policy to be shaped by a technocratic, automatic system under the sole authority of the ECB," he said.

Germany is isolated within the EU in its demand for tough fines on member states which stray from the stability criteria. But Dr Kohl's room for manoeuvre is limited by reluctance in Germany to abandon the deutschmark for an unpredictable euro.

The conservative prime minister of Bavaria, Mr Edmund Stoiber, warned yesterday against any weakening of the criteria for entry into the new currency.

"We cannot say in two or three years time, if such a policy means that pensions and savings are worthless and interest rates rise that was the price we had to pay for Europe," he said.

Frank Millar adds from London: The British Prime Minister, Mr John Major, yesterday congratulated the Irish Government on its conduct of the European Presidency, and on "the excellent Presidency text that they have produced about the Inter Governmental Conference".

Next weekend's summit was the primary issue on the agenda for yesterday's summit meeting in London, the penultimate in Mr Bruton's series of 14 meetings around the EU capitals.

Mr Major confirmed his view that the key negotiations on a new treaty would not take place until the Amsterdam summit next June.

However Mr Bruton told Mr Major he hoped Dublin would see the EU "move forward on the issues that remain to be resolved in regard to the creation of an Economic and Monetary Union in Europe based on a single currency.

He said the issues ready for decision in Dublin include the actual date, the confirmation of the date for the commencement of the single currency, which is January 1st 1999; the legal arrangements which have also been finalised; the arrangements for the relationship between those Union countries that will be in the single currency from day one, and those who will not ... and finally the budgetary discipline that will apply to the countries that are already in the European currency from day one.

Mr Bruton said he hoped remaining difficulties could be settled at Thursday's meeting of the EU finance ministers.