BUNDESBANK President Dr Hans Tietmeyer has stepped into a row over the future European single currency by saying it would clearly reduce the financial and economic independence of those countries involved.

Dr Tietmeyer, in an article published in Germany's Handelsblatt newspaper today, says Economic and Monetary Union (EMU) due in 1999 would demand a "high degree of lasting common interest" among all of the participants.

"It would be wishful thinking to believe that within currency union the independence of the member countries. .. can be fully retained in economic and financial policies," he says.

Dr Tietmeyer's comments come after German Foreign Minister Mr Klaus Kinkel had earlier enraged British politicians by warning Britain that it must decide whether it wanted closer integration within Europe or not.

Mr Kinkel had used a New Year message to tell Britain it needed to reach "a clear decision" on its European policy. "Britain belongs to Europe. Europe needs Britain", he added.

Mr John Major's Conservative government has not yet made up its mind whether it wants to join EMU in 1999, and the issue is becoming increasingly sensitive as the country gears up for a general election due by next May.

A spokesman for Mr Kinkel denied that the comments were an attempt to influence the internal affairs of another country, saying the statement was intended as an expression of goodwill.

Unease about the potential impact of EMU on the national policies of individual countries had earlier been expressed by Swedish Prime Minister Mr Goran Persson, who warned that the future European Central Bank might become too powerful.

"The common, strong and independent central bank that will handle the common monetary policy on its own might lack a counterbalancing force in European fiscal policies," he wrote in an editorial article for a Swedish newspaper.

Mr Persson said that while Sweden would be able to join EMU if it wanted, the power of such central authorities could mean that European Union would be transformed into something quite different from that which the Swedes voted to join in 1994.

But Dr Tieimeyer stresses in his article that the arrival of the euro will make it more important for countries to attune their internal policies to those in the wider currency union.

"In particular, fiscal and wage policies must (as a result) be fitted to the demands of currency union and, what's more, [this must happen] over the long run," says the head of the Bundesbank.

Isolated reactions by EMU member countries to external events such as the oil crisis of the 1970s - could be in conflict with wider European monetary policy, he said.