How to reconcileFrance’s desire to bind Germany westwards into the EU and the Atlantic alliance, with French ambitions to build an economy equivalent to Germany’s was a perennial dilemma of post-war politics. In its domestic economy,France hesitated between policies to harden its own mercantilist practices in order to resist, and liberalisation policies to accomodate German competition in more integrated world markets. In international monetary negotiations,France alternated between promoting a climate for economic growth inEurope, and meeting German demands for stability-oriented policies and performance as a pre-requisite to a new currency regime. Its preferred vehicle for reconciling growth and stability was a “common currency” jointly managed by a confederation of interdependent states. The Bundesbank’s steel grip over interest and exchange rate policies in Europe would be loosened if they were decided by a wide coalition of states, includingBritainorItaly, that together diluted Germany’s influence. The German government had no such hesitations. It regularly presented Francewith two choices: accept the Bundesbank’s unilateral decisions in favour of stability as a junior partner, or multilateralise them on Frankfurt’s conditions in a “hard core” of states, where German preferences would be paramount. In the latter case, its preference was for European Monetary Union (EMU) on a federal model, whose achievement required the convergence of economic policies and performances on a common norm. This formula enabled the German government both to present an ambitious European project which assured a monopoly over monetary policy for the Bundesbank, if the terms could not be met by other states, or for a European Central Bank, modelled on Bundesbank lines, if they could. The burden of proof thus rested on others; if the DM remained, it would not be by Germany’s design, but on account of the failings of EU member states.
“The present controversy over the new European monetary order,” the Bundesbank Council member Wilhelm Nölling has written, “is about power, influence and the pursuit of national interests”. These interests, and the motives, the bargaining and the deals they inspired, are analysed in the following sections on German and French monetary relations in the broader security context of the Atlantic alliance, Germany’s emergence as Europe’s prime industrial and monetary power, France’s challenge to the DM as a result of President Mitterrand’s decision with Chancellor Kohl’s support to accept Germany’s conditions in order to achieve a maximal French objective of abolishing the Bundesbank, and the resulting struggle in the course of the 1990s either to preserve the DM or to assure its final demise within a more federal EU.
The Atlantic context.
The permanent context of repeated European efforts to fix currencies or to establish monetary union has been provided since the 1940s by the US as the world’s banker.Initially, the dollar was exchangeable by other central banks at the official IMF price, and Congress ensured that the IMF statutes included no practical measures against chronic surplus countries, the United States being the only candidate for that condition in 1945. But by the 1960s, the USexternal deficit widened while continental states and Japan moved to trade surplus. Dollar credits accumulated in central bank reserves and irrigated the nascent offshore dollar markets in London. Germanyin 1967 was bidden not to convert dollar reserves into gold, and an arrangement was made whereby the Bundesbank dollar reserves would be in part reinvested in US Treasury bonds–thereby helping to finance the USfederal government deficits and to sustain USgrowth. The whole edifice was brought down in August 1971, when President Nixon announced the dollar’s non-convertibility into gold. In March 1973, the Bundesbank followed suit by ending the purchase of surplus and moving the DM to a free float. The dollar-DM axis subsequently became the pivot of intra-European exchange rates, with the shots being called by the world’s key currency. It was the dollars fall in the winter of 1977 that prompted Chancellor Schmidt to establish a stable exchange rate regime (ERM) in partnership with France.In winter 1994-5, the dollar plunged against the DM following the Mexican debt crisis and the Kobe disaster in Japan, prompting cries from German industrialists for accelerated moves to monetary union in the EU.
German exporters’ aspirations to take shelter from dollar turbulence within an EU currency regime was one reason for the choice of money as the highway to closer European union. Another lay in the transformation of European security. Since 1967, NATO policy on nuclear deterrence had hinged on the concepts of “forward defence” and “flexible response”. This meant thatGermanywas to be defended as far forward as possible, but that the allies were to respond to attack by escalating from conventional to nuclear force. Political support for such a policy began to dry up inGermanyduring the scare over the installation of nuclear missiles in the early 1980s, prompting Foreign Minister Genscher to introduce security policy into EU deliberations and to vigorously promote détente, as less likely to alienate a frightened German electorate. The end of the nuclear stand-off in central Europe came in December 1987, when the US andUSSR leaders signed the Washington Treaty leading to the removal of intermediate-range nuclear weapons inEurope. The deal in effect deprived Germany of credible nuclear cover, and marked the de facto end of the cold war, of which the fall of the Berlin Wall in November 1989 was a consequence.French diplomacy sought to breathe life into the dormant WEU, and to revive the military provisions in the 1963 Franco-German Treaty by setting up the Franco-German Security Council in January 1988.
Foreign Minister Genscher, sensitive to the significance of the Washington Treaty and the need to comfort French concerns about Germany’s western orientation, responded favourably.With Mitterrand’s re-election to the Presidency in May, French EU policy moved in Germany’s direction, and at the Franco-German summit of May 1989, Mitterrand picked up on Bonn’s initiative to reassert the common objectives of a “social Europe” and a European monetary union. By contrast, French military policy remained firmly national with regard to nuclear weapons. France’s nuclear doctrine of massive retaliation was confirmed in the defense programme presented to the National Assembly in September 1989. Nine regiments, posted on France’s eastern frontier, were to be equipped from 1992 on with the Hades nuclear missile system, with a range of 450 kilometers. Bonn was not consulted.. Relations between Paris and Bonn deteriorated sharply as Kohl led Germany to unity. Only the United States stood consistently by Germany. Indeed, as Zelikow and Rice argue, Maastricht was the tribute paid by Kohl to French dismay and frustration, and a token to the French of German credentials as good Europeans.The EU’s importance for France’s embrace of Germany was underlined when Kohl and Mitterrand proposed political union in April 1990. Their common message to the Irish EU Presidency called for the intergovernmental conferences to include the establishment of common foreign and defense policies. At theDublin summits of April and June, 1990, political union discussions and monetary union talks were set to begin in December, and to end one year later under the Dutch Presidency in December 1991. The German government clearly understood political union as a synonym for a common foreign policy, extensive majority voting, and more powers to the European Parliament.
Negotiations at Maastricht yielded a German commitment “irrevocably” to abandon the DM in January 1999, but without adequate compensation in the form of political union. Security in Europe and for Germany hinged first and foremost on a continued US presence. This implied keeping defense policy within the domain of the states,and therefore of NATO.The United States was united Germany’s prime ally in the maintenance of the new and wider European balance.A wider Europe introduced further areas of dischord between France and Germany over the EU’s institutional forms, over the relations between the EU, the WEU and NATO, over opening to eastern trade, the pace and method of the EU’s enlargement, and the balance to be struck between the demands of the countries of central-eastern Europe, and those of the southern Mediterranean. These differences greatly complicated the EU’s internal deliberations, and were accompanied by much closer security co-operation between Parisand London. France, under President Chirac rejoined NATO with the ostensible aim to “Europeanise” the organisation. But the redefinition of NATO’s security tasks in a changed Europe at the Berlin Atlantic Council summit in June 1996, in effect consecrated NATO as the prime organisation responsible for European security, and the US as undisputed leader of the western alliance.It was not at all evident that the US would welcome a fully fledged European currency to challenge the dollar’s hegemony as reward for its pre-eminent role in keeping the European peace.
German primacy in Europe.
Monetary union had been an integral part of the federalist cause for a united Europe, but the signatories to the Rome Treaty had made no reference to it in the texts on the grounds that the subject was too sensitive politically. There premonitions were amply justified,as subsequent EU proposals were regularly whittled down to modest accords on exchange rate co-ordination. Commission suggestions of monetary union and a single capital market had received short shrift at the hands of France and Italy in the 1960s.The EU then launched a second, and more serious attempt at monetary union,sketched in the Werner Report, presented to the Council in October 1970. The report proposed the creation of a single European currency, complete liberalisation of capital movements, freedom of establishment for financial institutions, a common central banking system essentially modelled on the US Federal Reserve System, and a centralised EU economic policy body, responsible to the European parliament. The report also suggested a three stage move to union.
Such aspirations were undermined by divergent ideas on means and ends.Germanyargued that it would not be possible to align exchange rates more closely in the absence of convergence in economic policies and performance.France argued that the member states should fix their exchange rates, which would then force them to achieve convergence in their economic policies. These differences cloaked incompatible objectives.Germany’s emphasis on economic convergence implied a slowdown in French growth to slower German norms.France’s proposal to fix exchange rates faced the Bundesbank with the prospect of capital inflows, stimulating inflationary growth, and providing bouyant markets for French, or other, producers. This was not acceptable to the Bundesbank, which decided in March 1973 to float the DM.
The Bundesbank’s subsequent tight money policies at home propelled producers on to international markets. Over the years from 1970 to 1993, Germany’s trade surpluses amounted to an accumulated value of over DM 1,420 billion. One half of total exports was accounted for by 100 of Germany’s largest companies, 88 of the largest companies were run as joint stock companies; and their most frequent shareholders were the three large banks and the insurance giant, Allianz.. Collective wage bargaining ensured that wage rises lagged increases in productivity. Trade unions were given positions of equality with shareholders on the boards of large German corporations. The converse side to this “model Germany” was the surge in public debt from 18 to 46% gdp between 1973 and 1993, making the DM bond market the third largest in the world. The Bundesbank kept control of the primary bond market through the consortium of major banks, while the secondary market migrated on the grounds of “the preeminence of the London market in the domain of corporate finance and money management”.
The Bundesbank’s preferred option was to have the DM’s rate set on world financial markets, as was the case in the four years from 1973 to 1977. The Bundesbank set foreign exchange policy, not the government, and it was under no obligation to intervene in foreign exchange markets. Neighbouring small countries hitched their currencies to the DM, as a means of exerting a price discipline on their economies. Inflation-riven countries such as Italy, Britain, the smaller European Mediterranean countries were excluded from the DM zone. But the whole arrangement depended on a relatively stable dollar-DM exchange rate. This was ended in 1977 by President Carter who chose domestic growth over dollar stability, leading to a strong upward pressure on the DM. The Bundesbank sold DM to keep the rate down, prompting its rapid growth as an international reserve currency.
Depreciation of the dollar, and upward pressure on the DM in the winter of 1977-78, convinced Chancellor Schmidt of the urgency of extending the DM zone to incorporate the French franc. Tying the DM to a weaker currency would shield German exporters on world markets. President Giscard d’Estaing had appointed Prime Minister Barre with a mandate to import to France the virtues of “the German model”. The European Monetary System(EMS), conceived as a Franco-German initiative in April 1978, was launched in March 1979. Two key issues emerged during the negotiations: 1.Germany was concerned not to bear the burden of adjustment; 2.France wanted to widen the coalition of members beyond the DM zone, requiring inducements to bring the weaker currencies into the scheme.
The question of adjustment hinged on the intervention mechanism to maintain exchange rate stability. Francewon recognition of the European Currency Unit (ECU), whose value was equal to a weighted average of all currencies. The ECU was a central bank unit of account to define the value of each currency and hence their bilateral parities. As the DM weighed most, the Bundesbank would have been called on most to maintain currency relationships to the ECU.Bundesbank Governor Emminger wrote to the German Chancellor, registering Bundesbank reservations about having to intervene to support weaker currency countries–a statement that came back to haunt European monetary relations.The Bundesbank also opposed the ECU(the French called it écu), on the grounds of its being an index of currencies. Had it been allowed to develop, the Bundesbank feared that it would have to buy “ECUs”, that is weaker currencies, for DMs, and without counterpart. In effect, theEMS rapidly acquired the DM as central indicator.
The inducements related to the availability of funds to help reduce inequalities among EU member states. Weaker currency countries had serious concerns about being tied in to a DM bloc. ItalyandIrelandin particular requested EU funds to help deal with unemployment, regional poverty and low productivity. France and Germany eventually grantedItalya 6% band of fluctuation in theEMS, to make allowance for its chronic financial difficulties. Britain retained its option to join, but showed no willingness to make parity changes for sterling a matter of EU concern. The fiscal transfer mechanism to help finance deficit countries remained modest. The proposed pooling of foreign exchange reserves with a European Monetary Fund (EMF) was postponed in December 1980. The EMF was quietly dropped, in view of Bundesbank opposition to its creation. In February 1981, it went on unilaterally to raise interest rates to unprecedented levels to stabilise the DM and stem the outflow of capital to theUS. It thereby became Europe’s de facto central bank.
The heyday of a DM zone disguised in ERM clothes came in the years 1981-87 when the Bundesbank supervised regular but small currency realignments. A crucial episode was President Mitterrand’s decision of March 1983 to keep the franc in the ERM. He had little choice, given the explosion in French debt charges payable in harder currencies. Indeed, a prime objective of French financial reforms in the years 1984-88 was to lower the cost of finance for the public purse. Bank reforms had been initiated by Delors during his years as Finance Minister from 1981 to 1984, but the major reforms were launched that September by the new Finance Minister Bérégovoy, whose prime objective was the constitution of a “unified capital market, covering short to long term instruments,and all economic agents”. Paris was to develop as an international financial centre, and French corporate financing moved towards the model of Anglo-American financial market economies. In particular,the Trésor fostered highly liquid money, bond, and futures markets, whose major products–all originating with the Trésor– included the Euro DM contract launched in May 1989, and the long term écu contract floated in October 1990 to develop Paris as the centre for trade in écus. In December 1985, the Banque de France modified monetary policy,and tied the franc’s exchange rate more clearly to the DM. “France, the Governor declared, now accepts the exchange rate constraint”.
Mitterrand’s decision of March 1983 also helped revive the momentum in EU monetary affairs. Finance Minister Delors negotiated with Bundesbank and Finance Ministry to keep the franc in the ERM and to stabilise the French economy, ending the hopes of reducing the nation’s unemployment rates through the gentle expansionary policies of the preceding two years. Delors bludgeoned the German government into a reluctant upwards realignment of the DM, while complaining of the “arrogance and incomprehension” of German financial circles. This experience confirmed his conviction that the only answer to stagnation in France lay in expansionary EU economic policies, and creation of a “single European social space”. This was consistent with Keynesian policy whereby high rates of employment could only be attained in sticky labour markets through an expansion of demand. Maintenance of western Europe’s mixed economy welfare states was vital to ensure continued popular support for the EU’s internal market programme.
In view of the more market-based policy consensus of the 1980s, an EU growth strategy could only be achieved in the very long run. In the meanwhile, Delors, and France, had to accept Kohl’s insistance on liberalisation of capital movements as a precondition to the internal market, for which he was prepared to consider monetary union as a “goal”.From the French government’s perspective, liberalisation of capital movements had the benefit of touching on all aspects of the internal market programme and of monetary policy. But a removal of capital controls by the French government was bound to make the franc more vulnerable to speculation, while Bundesbank reluctance to intervene on foreign exchange markets in support of weaker currencies, indicated that France would have to align economic policy even closer than it already was on German priorities.
This message was borne home brutally to the new conservative government of Prime Minister Chirac in January 1987 when a weakening of the dollar prompted an eleventh and acrimonious parity realignment in the ERM. Convinced that the fundamentals of the French economy were now sound, the government launched the “hard franc” policy in January 1987. Rather than have the Bundesbank accumulate dollars as the counterpart to German external surpluses, the French Finance Ministry sought to have the Bundesbank hold écus, and use them to subscribe to French Treasury bonds–as the Bundesbank had done since the 1960s with regard to US Treasury bonds.The use of the écu as central bank unit of account would also avoid the convergence demands that the Germans had appended to the single currency discussions of the early 1970s. It would permit a relaxation of macroeconomic policies, and a rapid easing of pressures on the European labour markets.This was the intent behind the creation in January 1988 of the Economic and Financial Policy Council, within the bounds of the 1963 Franco-German Treaty. Finance Minister Balladur expressed the French position clearly in his memorandum of February 1988 to the EU Finance Ministers, proposing a “common currency”,and a European Central Bank(ECB):the ERM, he wrote,effectively exempted “any countries whose policies were too restrictive from the necessary adjustment.”
France challenges the DM.
Kohl recognised that French dissatisfaction with the ERM would have to be accomodated, and shared Genscher’s view that EU integration had to be accentuated as Europe’s security context changed. The Finance Ministry was reserved about the French proposal. But the most serious reservations were expressed by the Bundesbank. It feared isolation in the proposed bilateral Economic and Finance Council, where Finance Ministries would have the upper hand in view of the subordinate position of the Banque de France. The German Cabinet hammered out a common position,presented in a February 1988 resolution. “The longer term goal is economic and monetary union in Europe, in which an independent European Central Bank(ECB), committed to maintaining price stability, will be able to lend effective support to a common economic and monetary policy”. Foreign Minister Genscher summarised the German government’s position: free capital movement, priority accorded to price-stability, political independence of the ECB, no inflationary financing of government deficits, and a federal structure, in the manner of the institutions of theFederalRepublic or theUnited States. In effect, the German government revived a version of the Werner Report, minus the idea of a centralised EU economic policy body.
Genscher determined to make a success of the German EU Presidency of early 1988. On June 13, the Finance Ministers decided to liberalise capital movements, as the pre-requisite to a more efficient allocation of European savings. At the European Council of Hanover on June 27, the EU political leaders agreed to incorporate the central bankers into talks on monetary matters. The German government preferences were for an independent central bank, economic convergence of participating states on low inflation before an after the conversion to a single currency, and no weakening of the Bundesbank during the transition phase. The French government in effect proposed a “common currency”, througho revival of the original design of the EMS. This would entail the progressive construction of a “European Reserve Fund”, with the task of administering the stability of EU currencies towards third parties, and in support of the ERM.This Fund would have foreign exchange reserves placed at its disposal by the central banks. In the longer term, it would prepare the way for completion of the monetary union.
As president of the committee, Delors presented the report in spring 1989.It represented a victory for the German position, not least in that the report made clear that the “transition” to a single currency represented a marathon with a receding winning post. The ECB was to be independent; there were to be binding rules on government spending; the report incorporated the earlier Werner report’s proposal of a three stage transition;and the narrow ERM band was presented as providing a “glidepath” to monetary union. The bland text, replete with barely concealed differences,was vaguer with regard to timing. Stage one in July 1990 entailed liberalisation of capital movements;stage two, to start at an unspecified date,was to witness new institutions(with unspecified powers), precise but not binding rules relating to the size of budget deficits, and a reduction in margins of currency fluctation; the third stage, also starting at an unspecified date, would lead to “irrevocably fixed” parities, the replacement of national currencies by a single currency,and would only be embarked upon once all the instruments of the internal market were in place(an efficient competition policy, regulation of takeover bids and corporate control, a set of common fiscal policy goals and close monetary policy co-ordination).
Mitterrand’s immediate concern was to tie Kohl down on the timetable.The Chancellor did not share the Elysée’s sense of urgency. At the June 1989 European Council meeting in Madrid, it was agreed that the Delors report was to provide the basis for future discussions. The first stage was to start on 1 July, 1990, entailing liberalisation of capital movements These took effect on schedule, followed by German monetary union. EU institutions were to make “complete and adequate” preparation for an intergovernmental conference that would establish the timetable and substance for the later stages. Francethen took over the rotating EU Presidency for the second half of 1989.”I am a determined supporter of political Europeand seek to bring about economic and monetary union, an obligatory passageway”, Mitterrand declared. A catalogue of proposals for treaty changes was duly drawn up. By contrast,Kohl moved fast on German unity without consulting Paris, and then went along with Mitterrand’s urging in order to secure French support for German unity. At the EU Strasburg summit of December 8-9 summit, the EU heads of state and government reiterated support for the German people to “refind unity through free self-determination”, and Bonn concurred in Paris’ request that a new intergovernmental conference be held prior to the German elections in 1990, with a view to incorporating monetary union into the Treaties.
In order to retain coherence during negotiations, the German government adopted a maximal position. In doing so, it responded to three imperatives:
First, the DM was the pre-eminent symbol of Germany’s post war success in recovering from the war. It signified the FederalRepublic’s stability, and like the FederalRepublic, had taken a deep hold on the German people’s affections. Such an asset could only be abandoned in the name of some transcendant value.As Governor Pöhl candidly stated,the German people were being asked to sacrifice “a hard currency on the European altar without knowing what we would get in return’. Definitely, the écu, which Paris and London were so eager to develop, was no substitute. 
The second was rooted in the Bundesbank’s determination to preserve its regalian powers to issue DM, that underpinned its regulatory preorogatives over the financial system. Its natural consistuency was the “buy and hold” DM bondholder,whose returns had consistently exceded those from German equities.The doubling of the German debt in the six years following unity expanded the constituency considerably, and made it all the more important to maintain the DM’s credibility as a store of value, yet all the more difficult to achieve as Kohl sidelined the Bundesbank on German unity, and then signed up to its conditional absorption into an ECB at Maastricht. The Bundesbank had no alternative but to reassure its constituency of worried DM savers and investors by redoubling its determination to defend the currency.
The third imperative was to protect Germany’s social market practices from dilution by the internal market.  German proposals filled the content of the EU’s Social Chapter; but as Germany’s economic problems mounted, corporate Germany began to look more favourably on “Anglo-Saxon” shareholding, as an alternative to German methods of corporate governance. This required major restructuring of the German economy, prompting trade unions to accuse Kohl of abandoning consensus politics.
German unity was completed on October 3, followed by Kohl’s coalition’s victory in December general election, the first all-German general election since 1932. Whatever his aspiration to promote EU integration with France, Kohl had no option other than that of supporting the Bundesbank’s hardline in forthcoming monetary talks. At the European Council in Romeon 27-28 October 1990, Chancellor and Finance Ministry won acceptance of the Bundesbank’s conditions. These had been circulated in an unofficial paper, ‘Compromise Proposal for the Second Stage of EMU’ among other central banks. They were presented as “non-negotiable” (my italics)demands:political union; price stability, completion of the internal market; political independence of the ECB and member banks, and an ECB monopoly on all necessary instruments. Prior to union,price levels had to converge on a stable and low norm. There was to be no inflationary financing of government deficits, and there were to be binding rules on government spending.
This German position was incompatible with French demands for a “common currency”. Mitterrand therefore decided to concede, as the price to pay for France gaining a voice in an independant ECB. But he continued to maintain after Kohl had agreed to surrender the DM by January 1999, that the economic governance of a united Europe would have to be predicated on the Council of Ministers, and answerable to the European Parliament. Mitterrand forceably reiterated the French government’s position at the time of the September 1992 referendum on the Maastricht Treaty:`Those who decide economic policy, of which monetary policy is only one instrument, are the politicians elected by universal suffrage, the heads of state and government who make up the European Council” At the Brussels summit of December 1994, the EU governments welcomed Delors White Book on growth, competitiveness and employment. President Chirac returned to the theme, indicating thereby that the French concept of “economic governance” of the EU was not to be circumvented.
Once the German conditions had been accepted, Kohl, in a gesture to Mitterrand, announced January 1994 as the date to start the second stage, prior to the Rome Council of October 1990 But the German government’s discourse nuanced that concession with the argument that fulfilment of the conditions was more important than the timetable. As an ECB had to “succeed at the first attempt”,Bundesbank and Finance Ministry sharply opposed French plans for a powerful ECB until the last phase, and they found allies in theUKand theNetherlandsto keep monetary sovereignty in national hands until then. During this period, stability oriented policies were to be applied, and tough EU examination procedures established for passage to the third stage, to start in 1999.Franceinsisted against a general opt out clause forBritain, that would also have been available toGermany. But as the German delegation boasted about the Treaty,”we de facto exported German monetary order toEurope”. The protocol on convergence criteria would lie at the heart of the treaty’s implemention.
The balance sheet was thus stacked heavily in favour ofGermany. Both sides used the future as a place to locate their present disagreements: the German delegation had negotiated a marathon of an obstacle course, with only a distant prospect of more than a few member states reaching the finishing line on January 1,1999. But at the last moment, Mitterrand won Kohl’s commitment to override the battle of the experts as to whether the timetable or the conditions should take precedence. By agreeing to an “irrevocable” commitment to the timetable, Kohl in effect signed the DM’s death warrant.
A glidepath to (dis)union.
Kohl’s commitment to monetary union, and the Bundesbank’s active dislike of the Treaty, proved highly compatible. The Bundesbank’s determination to present the Treaty as partial and incomplete enjoyed the support of the Chancellor and Finance Ministry. For the EU to enjoy the full benefits of one money, an ECB meant full political union; it would have to make monetary policy for the EU as a whole, have the monopoly of money creation, and undivided power over exchange rate policy, binding on all members. But the Bundesbank’s demands did not stop there: the ECB would have to be located in Frankfurt; the interests of individual financial centres, such asLondon, would be subordinated to the ECB’s paramount goal of price stability, and by Bundesbank methods.
The Bundesbank also deployed its structural power over the DM in financial markets to register its disapproval of Kohl’s concession. As soon asGermanybegan to move to unity,Bonnhad indicated a preference forParisto agree to the DM’s upward alignment. But the request was stifled, as that would have entailed devaluation of the franc. Furthermore, Kohl’s overriding of Bundesbank advise in the course of German unity impaired the institution’s credibility on international financial markets; prompting the DM’s guardians to redouble their anti-inflationary vigilance. The Bundesbank allowed interest rates to rise both to keep inflationary pressures down, and to attract foreign capital into German bonds to help finance eastern reconstruction.
EU neighbours were therefore caught in a double bind: high interest rates in a fixed rate system exerted a deflationary pressure on business activity across the continent and increased the debt charges on European governments. On foreign exchange markets,the dollar floated down from spring 1990 on, as the Federal Reserve moved to lower interest rates in response to lower domestic growth and fears of financial fragility. Weaker currency countries in the ERM therefore were squeezed between higher interest rates, and more U.S. competition on product markets. The Bundesbank nonetheless saw fit to raise rates in December 1991, and again in July 1992 to the highest levels since 1931. This left the other European countries no option short of a spate of currency realignments than to give absolute priority to policy convergence based on price-stability.
Havoc was wreaked on the French corporate sector.World financial markets scented blood, once Mitterrand in June 1992 decided to hold a referendum on the Maastricht Treaty on September 20. But Kohl could not afford to see Mitterrand defeated in a crucial referendum by a de facto alliance of the Bundesbank with international speculators. Bonn and Paris concluded a “sweetheart deal”, whereby the Bundesbank intervened with the Banque de France in massive support of the franc.
For France to be a viable partner for Bonn in a Maastricht Europe, there was never any doubt that the apparatus of monetary control practised in Germany would have to be imported wholesale. This was consecrated by the May 1993 law “on the status of the Banque de France and the activity and control of credit establishments”. The Banque was “to define and implement monetary policy””in the framework of the government’s general economic policy”. A Monetary Policy Council was created to supervise the money mass. Appointments of the governor and the two deputies were made by the government, but the government was not to give the Banque orders, and its deficits were not to be financed by money creation. The Banque was given control of the banking system. The government though was to determine exchange rate policy. Governor Trichet’s first public testimony on behalf of the newly independent central bank was to the Bundestag, not to the National Assembly.
The “sweetheart deal” proved temporary. Mitterrand’s very different intepretation of the Treaty provided one reason for the Bundesbank to break free of its tight relationship with the franc.The second was the September 23 Franco German statement, demanded by Kohl, that bound the Bundesbank to expend reserves on the franc. The third factor was the election of a Gaullist-conservative coalition government in spring 1993. Many in the majority had militated against the Maastricht Treaty, and campaigned against the “social Munich” which France was paying in order to appease the Bundesbank. This was the spirit in which Finance Minister Alphandéry announced on radio in June 1993 that the Germans should lower their rates “That is why I took the initiative…to ask my colleague Theo Waigel, the German Finance Minister and Helmut Schlesinger, the president of the Bundesbank, to come to Paris in the context of the Economic and Financial Council to discuss together the conditions for a concerted lowering of irs in France and Germany”. With Kohl’s accord, Waigel had the meetings cancelled. A month later, Prime Minister Balladur invited Kohl to have the Bundesbank either defend the franc without limit or to lower interest rates. This also was turned down, as was the French proposal for the DM to leave the ERM. Kohl found no fault in Bundesbank and Finance Ministry proposals to widen the ERM band, finally agreed on in the EU Finance Ministers Council of August 1993. Paris acquiesced, on the grounds that wider bands shifted the foreign exchange risk to speculators.
Freed of any immediate political pressure for the Bundesbank to support weak currencies, the German government could now impose its interpretation of the Treaty. Dutch pretensions for Amsterda as the site for the future ECB were dismissed, on the grounds that the matter turned on Germany’s sovereign right to chose the future central bank’s location.The reward came forBonn at the October 1993 EU summit atBrussels, when Kohl won his majority of member states to locate the ECB inFrankfurt. The interim European Monetary Institute(EMI) started work on the Maastricht Treaty’s second stage in early 1994, and in the Bundesbank’s shadow. “Hard core” countries were advised against following the pound or lira down against the DM. They had to get their fiscal houses in order and ensure the stability of their currencies.
The German government’s pretension to lord Europe proved short-lived. It ill befitted a government to lecture others, while funding its huge budget deficit on European savings. Its troubles redoubled when in the winter of 1994-95, the dollar fell in response to the financial fallout from the Kobeearthquake in Japan, and the collapse of the Mexicn peso, sending the DM skywards. Then in May, Jacques Chirac was elected to the French Presidency in May 1995, accompanied by renewed rumours that the Elysée was considering bringing Italyand the UK back into a renewed ERM, predicated on the ecu.
Was a Gaullist France not returning to its “common currency”concept ? Both Finance Ministry and Bundesbank made clear that the name “écu” for the future currency was not acceptable to the German people. Finance Minister Waigel then launched the idea of a “stability pact”, whereby governments running excessive deficits would be fined. The target audience for this proposed tightening of the fiscal screw were anxious German bondholders, who doubted the ability of Italy to control its public spending.Waigel then told a Bundestag committee that there was little chance of Italy’s joining in 1999,and the Bundesbank reinforced the message by stating that it would deliver its own judgement on which members should qualify for the final stage.This was tantamount to saying that EU examination procedures took back seat to the Bundesbank’s verdict to the Bundestag. Kohl delivered a similar message to Chirac in October about the importance for France of implementing the convergence criteria.
While the German government was constantly tightening its interpretation of the Treaty, the French government moved to emphasise the Treaty commitment to the timetable. The means here centred on the Commission’s proposed “critical mass”strategy which suggested a fast transition to the new currency. From the Commission’s perspective,prompt use of the new currency in wholesale markets would ensure immediate credibility for the whole operation. Its position was elaborated in close cooperation with the European Banking Federation; the chairman of the Commission’s working group, Cees Maas, was a former senior official at the Dutch Ministry of Finance and a member of the board of ING.
By contrast, the Bundesbank favoured the EMI’s plans for a prolonged transition, between the “irreversible” fixing of currencies in 1999, and conversion to retail use of the new currency in 2002. The longer transition would provide the country’s numerous savings banks with time to adapt to the currency. This concern of the Bundesbank for the savings banks, and local institutions reflected the consensual nature of decision-making in a federal institution, where the states were amply represented in the Council. But the Bundesbank’s opposition to the fast track strategy of France and the Commission was entirely compatible with its clear hostility to Italy’s entry in 1999; its fear of losing the DM, and its bond market, for an untested Euro, with its highly liquid Euro-bond market, which–it feared–would alter corporate financing towards short-termism; and the weakening of its relations to the German commercial banks.
Simply, the big battalions of continental financial institutions were not in the Bundesbank’s camp.The German commercial banks favoured the “critical mass” strategy, and feared that Bundesbank policy would damage Frankfurt’s Finanzplat,. in competition with Paris and London. The French government pursued its ambition for Paris’ financial prospects as a centre for the Euro markets, and declared its intent to have the Paris-based banks issue securities in Euros from January 1999 on. .This put pressure on the German government to follow suit. Large corporations were likely to use Euros immediately.
At the Madrid European Council of December 1995, the German Finance Ministry secured a unanimous vote in favour of “euro” as the name for the new currency. The start of the third stage was quietly postponed until January 1999. In deference to French government concerns to have the decision prior to the general elections that spring,a deal was struck whereby early 1998 was to be the final date for judging which member states would enter monetary union. Britainwould then have the presidency, with the freedom to invoke its “opt-in” protocol. But what would Britain be opting in to? Germanysecured support for a three year and yet another three stage transition phase after 1999 in order to allow regional banks longer to adapt. But France ensured that governments in the monetary union would be allowed to issue tradeable debt in Euros as soon as the exchange rates were fixed in 1999. In deference to Germany, nontradeable debt could continue to be denominated in national currencies. This was tantamount to keeping an option open for the whole project to start not as one money, but as a common currency, thereby preserving the DM. In other words, ifGermany secured no satisfaction on fiscal probity, the DM would survive–in competition with the Euro.
As a senior official from the Finance Ministry lamented at Dublin,”our French friends are not what they used to be”. Unlike Mitterrand, Chirac’s government was not tempted by a Franco-German “go-it-alone” scenario. “Hard core” currencies, presently hinged to the DM, faced overvaluation on world currency markets, and both Germany and France were suffering from unprecedented levels of unemployment. Prime Minister Juppé rejected the idea, and German officials cited constitutional reasons against changing the status of the Bundesbank outside the context of the Maastricht Treaty.
Rather, the thrust of French diplomacy was busy crafting an EU coalition to balance Germany. One way was to bring Britain back into the negotiations. Some French banks wanted to join with Frankfurt in restricting UK-based banks’ access to the Euro settlement system. But such a policy threatened to undermine the single market in financial services, while Paris and London were co-operating to co-ordinate the Euro-time zones with Asian and North American markets. London and Paris had long cooperated in the development of the écu, and their institutions favoured the decision to convert écus to Euros at parity.Not surprisingly, it was the Ecu Banking Association which offered London banks an alternative to the official settlement system–if a British government were to recommend opting in, and lose a referendum, or to opt out and win a referendum.
Another means for France to craft a coalition to balance Germany was to link a renewed ERM, incorporating the “outs”,to Germany’s demands for a cast-iron stability pact. In April 1996,the Finance Ministers agreed to tighten joint supervision of exchange rate policies, whereby “out” currencies would move within the prevailing 15% bands in a grid hinged on the Euro.Italy’s return in June 1996 precipitated a rush by Spain and Portugal to prepare for 1999. This widened the French-led coalition in favour of restraining German demands for near automatic sanctions on fiscal delinquents The compromise at the Dublin European Council in December 1996 meted sanctions to fiscal delinquents experiencing negative growth of less than 0.75%.But the pact was redubbed “stability and growth”, indicating that Finance Ministers retained discretion.
The politics of monetary union have lain at the heart of Franco-German relations, and of EU affairs, since the late 1960s, when the DM began its ascent as the world’s second reserve currency. AsGermanybecame western Europe’s prime power,France quietly jettisoned its policy, inherited from de Gaulle, in favour of aEuropeof the states and adopted a more integrationist stance with regard to the EU. The French Finance Ministry’s preferred solution for the “common currency” was aimed to reconcile stable exchange rates jointly managed through common reserves, with economic growth under conditions of sticky labour markets. The idea was predicated on a confederal design for the EU, allowing for the preservation of national currencies and regulatory authorities, cooperating also within EU institutions. Mitterrand’s decision in 1991 to override his Finance Minister, Bérégovoy, and adopt Germany’s proposal for a single currency, requiring a more federal constitution for the EU, may be seen in retrospect to mark a decisive turn in French policy.
By contrast, the German government from the time of the Werner Report on, adopted a maximalist position in favour of a single currency, which experience had shown in the early 1970s was unlikely to be acceptable to France. The German government’s preferred solution for a single currency entailed the adoption of anti-inflationary policies by member states, if necessary at the expense of employment. The same maximalist position was presented in the German government’s proposal for an ECB in 1988, in the Delors Report, and in the Bundesbank’s position paper of October 1990. Indeed, the German government could not have asked for less, in view of German public opinion, DM bondholders concerns, and the central role played by the Bundesbank inGermany’s social market economy. Clearly, though, the French government’s switch of position in favour of a single currency, confronted the German government with its own rhetoric. Kohl opted to live by its promise and to grant Mitterrand an “irrevocable” commitment to move to a single currency by 1999. But he also used the Bundesbank’s hostility to the timetable to extract concessions from EU partners, most notably with regard to the ECB’s location inFrankfurtand the “stability pact”.
The fundamental differences between German and French objectives remain: both Mitterrand and Chirac indicated that once the currency was introduced, the ECB would be flanked by the Finance Ministers–who, in the French view, would set the parameters of monetary and exchange rate policy. In others words, there was to be a significant role for national fiscal policies within a single currency area. These would be conducted in a non-inflationary manner, asFrancehas done since the mid-1980s. The German government by contrast emphasises, with strong Dutch support, the independence of the ECB, contests recurrent French reference to a parallel role for national fiscal policies, and interprets the Treaty as imposing strict fiscal constraints before and after 1999. The German government repeatedly claims monopoly powers for the ECB in monetary and exchange rate policy, as well as in regulation of the Euro-capital markets.
These different positions indicate that trust remains a scarce resource: the German government repeatedly suggested that France and Germany go ahead in a “hard core” of stability oriented countries. This would mean placing France, with its growth orientation, in a minority of one in a club of smaller states closely tied toGermany.France repeatedly sought to widen its alliances, to incorporate Britain and Italy in order to balance Germany. This would mean placing Germanyin a stability-oriented minority, in a broader coalition dominated by countries with a record of preferring inflationary growth.
Germany’s hard-line position on stability weakened from the mid-1990s on. Once German business was converted to the urgent need for the Euro, supporters of the DM had no power base to support them. Their position was fatally undermined in May 1997, when the German Finance Minister, confronted with the prospect of not meeting the 3% gdp deficit target, sought to have the Bundesbank gold and foreign exchange reserves revalued. The Bundesbank ensured that the revaluation was postponed, but the incident opened Bonn to the charge that it was engaged in accounting gimmickry. It weakened Germany’s case for keeping Italy out, and enabled Paris to draw a discrete veil over its own creative accounting practices. Meanwhile, Paris determined to convert its French franc bond market to Euros, whether or not Germany went ahead in 1999, or waited until 2000, as allowed at the Dublin Council; the German government insisted on monopoly powers for the ECB in Frankfurt, as one means to promote Germany’s prime Finanzplatz.
France and Germanyhave dominated the agenda of monetary union, with their conflicts and their partial accords. As a result, they exported the costs of their incompatible policies to each other and to the rest of the EU. They may have failed to win the active consent of their citizens, concerned about the high rates of unemployment in the EU or about the EU as an unaccountable and distant political market. But equally, opponents of monetary union have not been able to overcome public apathy on the subject. The turning point came in the Hamburg state elections in September 1997, when the Social Democrats recorded their worst result since the war, running on an anti-monetary union ticket. The result sapped the confidence of opponents who were pressing for a delay. Monetary union hardly featured as an issue in the German general elections of September 1998, bringing to an end Kohl’s decisive sixteen years as Chancellor.
France and Germany have been able to mediate their differences, and advance their distinct goals. Both used the future as a location to place present disagreements, without disturbing the continued round of negotiations in the EU over incremental accords. By deciding on a deadline, Mitterrand and Kohl deprived their governments of their habitual use of the future as a means of evasion. They overcame the stalemate between experts over timetable versus content by opting for an act of faith, that the big leap to monetary union in the EU would be successful. With the Commission and Monetary Committee reports in, the EU Council meeting in May 1998 under the British presidency decided on 11 countries to join in the first round in 1999. Only Greece of the 15 member states did not meet the 3% deficit ratio. Germany also failed to keep its own debt-to-gdp ratio under the 60% ceiling.Italyand Belgium were in the first 11, even though their debt-to-gdp ratios ran at twice the reference level. On the other hand, the Dutch central banker, Wim Duisenberg, with tacit approval of the German government, was then appointed to be the ECB’s first governor—against the French government’s preferences.
Meanwhile, the introduction of the Euro brings with it a capital market the size of theUS domestic market, stimulating competition between financial centres. After years of dilatory negotiations between the stock exchanges of Frankfurt and Paris, in early 1998, Frankfurt announced an alliance with London. Monetary union had been a Franco-German affair. An even greater test awaited Franco-German relations once the Euro was introduced, and a capital market was created that would accelerate existing trends towards the spread of “Anglo-Saxon” shareholder capitalism.
 Timothy Garton Ash, In Europe’s Name,Germany and the Divided Continent,London,JonathanCape, 1993.
 For an overview of the economic literature on monetary union, Barry Eichengreen,”European Monetary Union”,Journal of Economic Literature,Vol.XXX1 (September 1993).pp.1321-1357. His conclusion is that the rationale for EMU has to be found in political economy, as economic arguments for and against are inconclusive.
 On the “German model”, see Une enquête du Monde: Vingt Ans de Réussite Allemande, Paris, Economica,1979.
 Wilhelm Nölling, cited in Bernard Connally, The Rotten Heart of Europe: The Dirty War for Europe’s Money,London, Faber and Faber, 1995.p.98.
 Interview with Helmut Werner, CEO of Mercedes Benz.”WhyEurope needs a single currency”,Finanial Times, May 26,1995.
 Hans-Deitrich Genscher, Errinerungen, Berlin, Sidler Verlag,1995.p.375.
 In David Dominique,La Politique de Défense de la France: Textes et Documents. Paris.Fondation pour les Etudes de Defense Nationale, 1989, pp.316-326.
 Die Welt, 15 September, 1989.
 Philip Zelikow,Condoleeza Rice,Germany Unified and Europe Transqformed: A Study in Statecraft,Cambridge (Mass),Harvard University Press, 1995.p.365.
 Stuart Croft,”European integration, nuclear deterrence and French-British nuclear cooperation”, International Affairs 72,4 (1996) 771-787.
 Paul Cornish”European security: the end of architecture and the new NATO”,International Affairs 72,4) (1996).751-769.
 EC Commission(1970)”Economic and MonetaryUnion in the Community”(Werner Report),Bulletin of the European Communities.Supplement No.7.
 OECD, Statistics of Foreign Trade, Series A.
German Monopolies Commission 1973-1983.Summaries of the First Five Biennial Reports.Baden-Baden, Nomis, 1987.p15
Ibid. p. 153.
Alfred Herrhausen, spokeperson of the Deutsche Bank, quoted in the Financial Times, November 28,1984
 Peter Ludlow, The Making of the European Monetary System,London,Butterworths,1982.
 In his letter to the German government in November 1978, Bundesbank Governor Emminger, indicated that Bonn and Frankfurt were agreed that a “definitive” regulation for the EMS would require a change in the Rome Treaty, and that a crucial aspect of Germany’s stability policy was to place “a limit on the intervention responsibilities “of the Bundesbank.(Emminger’s italics).In Otmar Emminger, D-Mark, Dollar Währungs-krisen, Errinerungen eines ehemaligen Bundesbank-präsidenten, Stuttgart, Deutsche Verlag, 1986.pp.361-2.(Authors’ translation).
 “Le poids du service de la dette éxtérieure interdit pour longtemps à la France une politique de relance”, Le Monde, November 15, 1983.
 Ministère de l’Economie, des Finances et du Budget. Le Livre Blanc sur la réforme du financement de l’économie, March 1986.
 Dov Zerah, Le système financier français. Dix ans de mutations. Documentation Française. 1993.p.125.
Le Monde, December 7,1985.
 L’Année Politique,Economique et Sociale en France, 1983.Paris,Editions du Moniteur,1984.pp. 35-36.
 “Double delight in Paris, but no thanks”, Financial Times, March 31, 1983.
 Pour Une Nouvelle Politique Sociale en Europe. Avant-propos de M.Jacques Delors. Paris, Economica,1984.
“Les orientations de la Commission des Communautés Européennes” Futuribles,March,1985.pp.3-18 .
 Paul Fabra”Le SME: un étalon-deutschemark une zone franc?”Le Monde, September 27,1987.
 See Finance Minister Balladur’s memorandum, quoted in English translation in the EC Monetary Committee of 29 April 1988 in Daniel Gros and Neils Thygesen, European Monetary Integration: From the European Monetary System to European Monetary Integration,London, Longman, 1992. p312.
 Dieter Balkhausen, Gutes Geldund schlechte Politik, Düsseldorff, Capital,1992.p.71.
 Financial Times, June 23, 1988.
 Hans Dietrich Genscher,”Die Rolle der Bundesrepublik Deutschland bei der Vollendung des Europäischen Währungssystem”, Ergebnisse einer Fachtagung, Strategien und Ergebnisse für die Zukunft Europas, Gütersloh: Bertelsmann Stiftung, 1989, pp. 13-20
Peter Hort,”Ein Bilanz der deutschen EC-Präsidentschaft”, Europa-Archiv 15(1988)pp.421-428. François Puaux,La politique internationale des années quatre-vingt,Paris,Presses Universitaires de France,1989.pp.159-177
 Economie Européenne,La création d’un espace financier européen,No.36. May,1988.pp9-10
 See Eric Aeschimann, Pascal Roché, La Guerre de Sept Ans: Histoire secrète du franc fort 1989-1996. Calmann-Levy, 1996.p.88.
 “The Delors Committee’wrote Helmut Schmidt,” did not satisfactorily state why it turned down a partial solution, whereby the ecu would serve as a parallel currency alongside national currencies and gradually squeeze them out. This refusal closes a pragmatic way, which the bond mkts are already taking”.”Am Sankt-Nimmerleins-Tag?”.Die Zeit, September 7,1990.
 Interview with President Mitterrand. Le Nouvel Observateur, July 27,1989.
“Les Douze acceptent que le peuple allemand retrouve son identité”, Le Monde, December 10-11,1989.No date was named for completion of monetary union, reflecting Kohl’s reticences and Thatcher’s opposition.
“Pöhl pocht auf Unabhängigkeit einer Europäischen Notenbank”, Die Welt, September 4, 1990.
 “Pöhl attacks use of Ecu as substitute for D-Mark”,Financial Times, March 2,1991.
“Why bonds reign supreme for German investors”, Financial Times, February 28, 1996. BZW’s German Equity-Bond Study 1996 reported that German bonds since 1960 returned 3.7% per annum in real terms, compared to equities’ 2.3%. InUK, real return on equities has been 8.7%, versus.2.5% on government bonds.
 See, for instance,”Vier von fünf Deutschen gegen den Euro 1999″,Süddeutsche Zeitung, February .1, 1996.
.See Presse und Informationsamt der Bundesregierung. Nr. 40/S. 333. Bonn. March 22,1988. Ansprache des Bundeskanzlers,”Europas Zukunft-Vollendung des Binnenmarktes 1992″. Nr. 172/S. 1525. Bonn. December 9,1988. Erklärung des Bundeskanzlers zur Eröffnung. Nationale Europa-Konferenz in Bonn. Also Handelsblatt,August 31,1989.”Europakonferenz: Kohl will Mitbestimmungsmodell offensiv vertreten”.
 “Cracks around the edges”;Financial Times, February 27 1995.
 ” German work consensus turns to conflict”,Financial Times,April 25,1996.
 “EG-Länder werden auf Gedeih und Verderb miteinander verbunden”,Frankfurter Allgemeine Zeitung, September 26, 1990.
 By adopting a single currency, “France,Mitterrand stated, will exert more influence in an ECB than it does today over the DM”Aeschimann,Riché.p.91.
Le Monde, 5 September, 1992.
 “L’Europe selon Chirac”Le Monde, March 25,1996. “A la Banque centrale européenne, que nous avons voulu forte et indépendante, il reviendra de garantir la solidité future de la monnaie européenne. Mais c’est au Conseil des Ministres, institution répresentative des états, qu’il appartiendra de définir les orientations de la politique economique de l’Union, à l’unanimité chaque fois que c’est l’essentiel”.
. There are many accounts of this “sweet heart deal”; Bernard Connally, The Rotten Heart of Europe: The Dirty War for Europe’s Money, Faber and Faber, 1995pp150-160;p.206. “Kohl paid secret Friday visit to the Bundesbank”, Financial Times, September 19,1992″The monetary tragedy of errors that led to currency chaos”,Financial Times, December 12,1992.”The dayGermany planted a currency time bomb”,Financial Times, December 13, 1992. Aeschimann, Roché, La Guerre de Sept Ans: Histoire secrète du franc fort 1989-1996.Paris,Calmann-Levy, 1996. .pp.148-153
 “Odd couple’s testing tiffs”,Financial Times, March 24,1994.
 “How Kohl linked EMI choice to Delors succession”, Financial Times, October 26,1994.
 “L’autre scénario monétaire”,Le Monde May 18,1995
 “Europäische Einheit und Stabilitätspakt für Europa” Finance Minister Waigel speech to the Bundestag on November 7, on the occasion of the budgetary debate.BMF(BundesMinisterium Der Finanzen).39/95.November 8 1995.
 “Progress Report on the Preparation of the Changeover to the Single European Currency”, Submitted to the European Commission on May 10 1995. Compiled by the Expert Group on the changeover to the single currency. It fed into the Commission’s Green Book, which suggested that the interbank market to function immediately in ecus in 1999. Commission Européenne, Une Monnaie pour l’Europe, Livre Vert sur les modalités pratiques d’introduction de la monnaie unique.May 31,1995.
 “Euro-bank takes cautious line on monetary union”, Financial Times November 15,1995; “Le passage à la monnaie unique”, Le Monde November 15,1995.
 “Der Euro verändert die Rolle der Bundesbank”, Frankfurter Allgemeine Zeitung, March 18,1996.
 “Plädoyer für schnelle Währungsunion”,Sud Deutsche Zeitung,September .1,1995;”German banks call for quick action on Eurocurrency name”,Financial Times, September 1,1995.
 “France wants rein on non-Emu states”, Financial Times, February 21 1996.
 On January 15,Otmar Issing asked “whether the states will succeed in lauching this great project in such a short time in conditions such that the future european monetary policy can start in good conditions with the common currency“.(my italics) “La coalition du chancelier Kohl se divise sur la relance de l’economie”Le Monde, January 18, 1996
 “France andGermany struggle to turn their European dreams into reality”,Financial Times, December 14, 1996.
 “France rejects link to D-Mark”,Financial Times, February 13 1996.
 “New Euro clearing system could ease Target tensions”,Financial Times, December 14,1996.
 Aeschimann, Roché, La Guerre de Sept Ans: Histoire secrète du franc fort 1989-1996..p.324. “L’autre scénario monétaire”,Le Monde May 18,1995;”Row asFrance presses forItaly’s return to erm”,Financial Times, March 18,1996.
 Member states could escape sanctions :1.in the event of a natural disaster or if gdp fell by 2% in one year;2.finance ministers would have discretion to decide in cases where gdp fell between 0.75% and 2%;