Ireland and Italy have a shared interest in joining an inner core

IRELAND follows Italy as president of the European Union by an alphabetical accident. But there are, nonetheless, several points of similarity between their positions in the Union and the aspirations of their governments to be members of whatever inner core or avant garde emerges from the present intense negotiations.

These add interest and continuity to the co operation between the two states at the European, Council in Florence, where negotiating batons and dossiers are handed from one government to the other.

In his forceful pre summit speech to the European University Institute in Fiesole (where he was introduced by its Irish president, Dr Patrick Masterson) the Italian Prime Minister, Mr Prodi, fully acknowledged that a differentiated Europe is the way of the future, notably in the fields of economics and defence.

"This represents the only real possibility for completing in a short space of time the journey towards the political integration of an enlarged European Union," he said.

No obstacles should be put in the way of the creation of a nucleus of states within the EU ready to proceed much more rapidly with defence co operation "as long as this does not take on the character of a directoire, which would be contrary to Italian national interest and the whole EU spirit".

Mr Prodi admitted that Italy has problems making the economic fast stream, or the first wave of states in a monetary union, because it does not meet several of the Maastricht convergence criteria. But the project is so important that it must proceed he rejected the idea that the pace of the train should be dictated by the slowest carriage - "That is not how we conceive it".

There is an enormous political psychological issue here for Italy. In all important respects it considers itself to be in the front rank of European states. It was a founder member of the EEC, is the sixth largest economy in the world and is part of the essential definition of European cultural inheritance.

This is readily apparent to those attending this summit, where the history of Florence can be seen as a metaphor for Europe as a whole. The European University is at the forefront of research on European integration, and particularly on differentiation.

It is not surprising that Mr Prodi should play up the defence issue. Italy has had a prominent, but underestimated, role in the Yugoslav crisis, and its presidency has brokered an agreement that will in time see Slovenia joining the EU.

Geographically it straddles the core and the periphery geopolitically it is at the centre of relations between Europe and the Mediterranean world.

Italy therefore has comparative advantage in emphasising its indispensability for European security and defence. Mr Prodi's new centre left government plays to the Franco German agenda in the IGC negotiations in these respects.

It may hope thus to compensate for its economic weaknesses, perhaps by encouraging a "dynamic" interpretation of the convergence criteria, which would see strict arithmetical rules bent politically to allow its participation in the first wave of an EMU.

As Mr Prodi put it in answer to a question, one year ago Italy was considered to be a lost cause by those at the forefront of European integration. Now all is transformed, so much so that his government is accused by the opposition of ingratiating itself with the new German hegemony.

There is certainly a profound change in emphasis and policy. The brief Berlusconi government sent strongly Euro sceptical signals and explored an accommodation with London on several major issues.

Mr Prodi will have to administer bitter medicine on public expenditure cuts and monetary discipline if Italy is to qualify for EMU, even if the rules are somewhat bent.

This will test the popularity of his government, as will any decision to re enter the ERM, which would remove the strong competitive advantage smaller Italian firms have gained in export markets from the 30 per cent devaluation over the last four years.

Comparatively speaking, and despite the differences of scale, Ireland is in a stronger economic position to join an EMU than Italy. It certainly does not have the same interest in defence cooperation, on which its position is somewhat similar to that of the Italians on economic matters.

Following yesterday's decision here to hold a special European Council in Dublin in mid October, we can expect to hear a lot more about both subjects in the next few months.

If a differentiated Union is indeed inevitable, Ireland faces several important policy dilemmas in the next few years over its position within the EU.

The determination to go ahead with the first group in a monetary union, even if the British stay out, is the most acute of them. What if the decision also coincided with a Northern Ireland settlement expected to increase North South economic co operation?

Even if a Labour government is elected in Britain, it is not expected to join a monetary union in its first term.

But from the point of view of maintaining its position in the inner core of an enlarged Union, Ireland must aim for the monetary union option, in keeping with its communautaire approach since it joined in 1973. It is much more constrained from involvement in any avant garde in the field of foreign policy, security and defence by military neutrality and hostility to nuclear weapons.

Its interest here is to preserve equal access to a more variable framework of security co operation. But the underdeveloped debate on European security will be exposed in coming months as the depth of commitment to it by core states becomes apparent.

Ireland is also constrained by the free labour market and travel arrangements with Britain from participating in the Schengen scheme, and therefore from pooling more sovereignty on immigration and asylum.

In the longer term difficult negotiations are due on enlargement, budgetary provision for structural and cohesion funds, EMU and CAP reform. The challenge facing Irish policy makers is to steer the State towards the core of a more differentiated EU while maintaining the support of those who may be disadvantaged by it.

So far there has been cross party political consensus on most of these issues, but will it hold? Ireland and Italy have a common interest in preventing an exclusive inner core group emerging, which would ease the political burden of managing this transition.