IT WAS 2 o' clock yesterday morning when the Minister for Finance, Mr Quinn, produced the final compromise of the night on the Stability Pact. It was the third of the options carefully prepared by the presidency.
The first was too close to the Germans to wash with the rest, the second too close to the rest to wash with the Germans. Now the time had come, Mr Quinn declared, to grasp the nettle. He appealed to the German Finance Minister, Mr Theo Waigel.
The only people to benefit from their failure, he said, were those who doubted the whole monetary union project. Failure would again raise suggestions that the timetable would not be met, he said.
If that were the case, Ireland, for one, would have to have a referendum, he warned. And they should not imagine that the decision would become any easier if postponed. At stake was a definition of the circumstances in which countries which joined the euro could avoid being fined for running a deficit in excess of 3 per cent of GDP.
All parties acknowledged that penalties should not apply where a country was facing a severe recession: the problem was defining a severe recession. Anxious to make the disciplines as tight as possible, Mr Waigel insisted on a quantified figure, a fall in GDP of 2 per cent. Others sought simply a reference to significant recession, leaving political discretion to the Council of Ministers, anathema to the Germans.
The Irish compromise, based on a suggestion from the Belgians, provides for a two stage approach recessions in excess of 1.5 per cent will qualify automatically for "exceptional" status, while if a state has a recession between 0.75 per cent and 1.5 per cent it may make a special case to the Council of Ministers for special treatment.
The formula, although significantly less strict than the German proposal, provided both quantified figures and implicit restrictions on the scope of discretion of ministers.
At the meeting Mr Waigel repeatedly rejected suggestions that his proposals were incompatible with the Maastricht Treaty in allowing no room for political discretion. Indeed, he said, the treaty itself significantly circumscribed that discretion.
The Luxembourger, Mr Jean Claude Juncker, uniquely bulb a foreign and prime minister, appealed to colleagues not to allow a minute difference to scupper agreement. It was something he, for one, would find it very difficult to explain to the public, let alone fellow prime ministers when they came to discuss it.
The British Chancellor, Mr Kenneth Clarke, backed what he said was an "ingenious" solution; but there was less enthusiasm from the French Minister, Mr Jean Arthuis, and the Spanish, Mr Rodrigo de Rato Figaredo. There were half hearted attempts to suggest changes in the wording.
No, said Mr Quinn, this is it. All he would do was put the figures 0.75 and 1.5 in square brackets, to be agreed by the heads of government. The rest was take it or leave it. They took it and Mr Quinn went out at 3.00 a.m. to report partial success to the press.
But when the accord was brought to "ads of government yesterday morning it became clear agreement would not be simple and they sent it back to the Finance Ministers. Mr Quinn pulled together an informal group of ministers: Mr Waigel, Mr Arthuis, Mr Clarke, the junior German Minister, Mr Jurgen Stark and the ministers of the next two presidencies, Mr Gerrit Zalm of the Netherlands and Mr Juncker. They were joined by the president of the Commission, Mr Jacques Santer, and the Economic Affairs Commissioner, Mr Yves Thibault de Silguy.
The informal meeting continued, eventually spilling over into lunch. Finally the breakthrough came. The Germans could have their 2 per cent fall in GDP before a country would automatically avoid a fine, while the French had their way on the political dimension.
The lower limit of a 0.75 per cent fall in GDP which would allow a country to appeal any sanctions was moved to the political realm and outside the scope of the stability pact itself.
A new paragraph was inserted into the proposal stating that countries would not invoke the appeal procedure unless they were in "severe recession". It continued, "in evaluating whether the economic downturn is severe the member states will as a rule take as a reference point an annual fall in real GDP of at least 0.75 per cent."
At last all the participants had a deal they could sell to their heads of state as well as to their respective populations. A final element was added to keep the French happy. The pact would now be called the Stability and Growth Pact - emphasising a point not often taken in France, that monetary union is good for jobs.
All that remained now was to secure the agreement of the heads of state. Here, again, Mr Juncker assumed a pivotal role. With his twin roles he was in a unique position to explain to his fellow prime ministers exactly what the deal meant. "They trusted him," Mr Quinn said. And as a speaker of fluent French, German and English, he could talk to all the participants without any help. That was crucial. Finally, Mr Quinn was able to emerge and declare the success. "A star is born," pronounced one of the Government's top aides.
Sean Mac Carthaigh adds: Had the stability pact rules applied since 1980, several European states would have been permitted to exceed the set deficit limit, or would at least have been able, to make such a case to the Council of Ministers.
In the 17 year period, the Republic has never come close to minus 2 per cent growth, nor would it have reached the 0.75 threshold.