Compromise puts new focus on the EMU debate

EU central bankers and monetary officials are finally turning their minds to what is turning into a highly controversial issue. How will decisions be made about who will be in the first group to move to monetary union?

In recent weeks, German officials and business people have increasingly raised fears about who will be in the first wave. In particular, they warn that Italian membership could compromise the launch of the currency and its initial stability because the Italian economy is not strong enough.

But excluding Italy outright could cause huge political problems, both at European level and in Italy. This has led to the compromise proposal, reported yesterday, which would exclude Italy from the first move to the single currency in 1999, but hold out the prospect that it could join in 2000 or 2001.

But negotiating a special arrangement for Italy - or even holding out the prospect of one - will inevitably raise speculation about a clutch of other states. Will the "Italian job" be done for other countries? Will Spain and Portugal be offered similar arrangements? And what does it mean for Ireland

The Government has been resolute in saying that Ireland must be in the first wave and we look likely to qualify. On the basis of our economic figures it looks as if we will be one of the closest to meet the Maastricht criteria.

But talks about an arrangement under which a state can join monetary union "later rather than sooner are bound to renew the debate about whether Ireland should join initially, if Britain stays out.

The final decision on who will join is not due until early next year. But it looks as if the talks are already getting under way.