Duisenberg gets the banker's job but compromise sees honour of France satisfied

In the end, lunch went on for 11 hours until after midnight on Saturday night and the formal summit then lasted all of 40 minutes…

In the end, lunch went on for 11 hours until after midnight on Saturday night and the formal summit then lasted all of 40 minutes, a brief rubberstamping of the decisions already taken. Then, in a gesture that reflected all the cynicism of months of French bullying diplomacy, President Jacques Chirac put his arm around Chancellor Helmut Kohl and marched out grinning to the cameras. Disagreement, what disagreement?

After the hours of bilaterals, trilaterals, and quadrilaterals, of false dawns and dreary hours of waiting for the bit-part actors, it was a matter simply of putting things on the record. The nominee for the presidency of the European Central Bank, Mr Wim Duisenberg, explained to the leaders that he unfortunately did not feel able to do the full term. It was, Mr Chirac told reporters to derisive laughter, a purely voluntary statement. In fact, it had all the spontaneity of a shotgun wedding. Dr Kohl would read the crucial words to his midnight press conference. They will be entered in the minutes of the summit.

"I have told the President of the European Council," the 62-yearold Mr Duisenberg said, "that given my age I do not wish to stay in office for the full term. It is nevertheless my intention to stay in office at least long enough to see through the transitional arrangements for the introduction of euro banknotes and coins and the withdrawal of national banknotes and coins in accordance with the rules agreed at Maastricht.

"I wish to underline that this is my decision and my decision alone and that I made it fully and entirely of my own free will. And that in my decision not to stay in office for the full term was not made under pressure from any side. In the future, too, the decision to resign will remain solely with me. This must be clearly understood."

READ MORE

No one was unkind enough to ask why he was to be offered the job if he couldn't see through the mandate.

The words were carefully crafted by lawyers to reflect the final compromise. Mr Duisenberg was to be appointed for a full eight-year term as specified by the treaty. His abridgement of the term had to come in the form of an indication of a personal desire to retire early or it could be subject to legal challenge. For the same reason no specific date could be mentioned.

At the press conferences held in the small hours there was room for wide divergence on what the deal meant. Mr Chirac assured journalists that Mr Duisenberg would leave office some time between January 1st and July 1st, 2002. For the Taoiseach, Mr Ahern, and others the understanding was clear that Mr Duisenberg would depart some time in the latter half of the same year after the introduction of coins and notes is complete and national currencies are formally abolished.

Then, before he had time to take up the mantle, they decided to appoint his successor, the Frenchman, Mr Jean Claude Trichet. A parallel agreement on the membership of the central bank executive board was agreed and the leaders went on to do the real business of the day, approving the 11 countries which will participate in the launch of the euro. All the speeches full of "historic days" were cut short in the rush to get home for what was left of, irony of ironies, the bank holiday.

The row has been bubbling along for over a year, ever since the central bankers had themselves unanimously, Mr Trichet included, suggested Mr Duisenberg's nomination to finance ministers. When Mr Chirac had been told he is reported to have exploded at their presumption. He announced that he, too, would have a candidate.

Suddenly there was a contest between two men of exceptional ability and expertise whose monetary orthodoxy has never been questioned and whose policies for the ECB were indistinguishable.

But France and French Presidents have never been shy about demanding that France's leadership role in Europe be reflected in its holding of key positions - and most particularly banking positions. The honour of France was at stake.

It took until January for Dr Kohl to realise that France was seriously prepared to veto a full eight-year term for Mr Duisenberg, prompting him to explore the possibility of a timeshare, EU diplomats say.

When the two leaders met in Poznan on February 21st on the fringe of a Franco-German-Polish summit, Mr Chirac suggested that Mr Duisenberg retire at 65, which would have given him barely two years in the job, and Dr Kohl suggested he serve five, the sources said. And there, very substantially, the issue stood until Saturday.

Lunch started late with a general round-table discussion. The reality, Mr Ahern said later, was clear then - 14 to one for Mr Duisenberg.

Then the British Prime Minister, Mr Tony Blair, called in the key players - Dr Kohl, Mr Chirac, Mr Duisenberg, the Dutch Prime Minister, Mr Wim Kok - in ones and twos for a series of what are known as "confessionals", returning periodically to brief fellow leaders on progress.

From early on Mr Duisenberg made clear to Mr Blair his willingness to retire early, but only on terms which explicitly left the discretion to him.

As the afternoon dragged on into the evening the French Prime Minister, Mr Lionel Jospin, clealry decided that this was his President's mess and he could handle it. Mr Jopsin left, rumour had it, to watch the French cup final.

It began to appear that Dr Kohl would accept an agreement that specified July 1st, 1999, as the retirement date and diplomats began briefing journalists that a deal had all but been done. Radio, TV, and the wires rushed to get the news out.

But Dr Kohl had not reckoned with his Finance Minister, Mr Theo Waigel, and the chairman of the Bundesbank, Dr Hans Tietmeyer. They pulled the plug on the deal, warning of political storms at home and a possible challenge in both the German Constitutional Court and the European Court of Justice. One evening paper in Germany had already headlined the deal "illegal". Agreement disappeared and the wires rushed to correct their earlier optimism.

Clearly it would not be possible to specify a date, but it took another three hours of frantic bilaterals by Mr Blair to get the whole thing back on board and for the French to accept the inevitable limitation on their ambitions.

A clearly subdued Dr Kohl told the press later it was one of the toughest EU summits he had attended. "There were many moments when I was not sure if we would get an agreement," he said.

The Taoiseach spoke of an atmosphere of intense relief at the end, "but it all ended up more or less where it started. It was classic negotiations."

The result leaves a sour taste in the mouth. And whatever about the market reaction, both Dr Kohl and Mr Kok are likely to pay a political price domestically for what is widely perceived as a fudge.

The much vaunted Franco-German alliance, supposedly the driving force of European politics, has also taken a dent, no matter what Mr Chirac might claim. He insisted to journalists that there was "no Franco-German difficulty, but a Franco-Dutch problem." German objections, he claimed, were purely technical or legal. Noone was convinced.

A classic French power play also illustrated very well the realpolitik of the EU veto system. A large country like France can wield the veto to bulldoze its way to an outcome favourable to itself where a smaller country will use a veto only as a matter of last resort.

And the British Presidency of Mr Blair has not covered itself in glory. Although there was a deal, it appeared to have been snatched from the jaws of defeat in a manner that has done much damage to the credibility of the ECB. The Italian Prime Minister, Mr Romano Prodi, and the Luxembourg Prime Minister, Mr JeanClaude Juncker, both criticised what they called the British presidency's poor preparation of the issue. "There were people much more experienced than me who said they had never seen anything like it," said the Austria's Chancellor Viktor Klima.

Mr Ahern, the spirit of Castle Buildings still intact, was somewhat kinder than some of his officials. "In all fairness to Tony Blair," he told reporters, "he had a hard day."