Economics Cliff TaylorEuropean Union discussions usually evoke the same level of, er, interest as the heady excitement of World Trade Organisation negotiations. Everyone knows they are "important", but few can bring themselves to delve too deeply into the details.

So it is that the negotiations under way in the Convention on the Future of Europe are rumbling along with only sporadic attention, often prompted by the standard apoplectic British reaction to any mention of the "f" word (federal, that is !).

A debate is under way among interested groups here, and the Forum on Europe has done much to bring the issue to a wider audience.

However, with a draft treaty due to be published before the next EU summit in June, the negotiations are due to move into an intensive phase - in other words the real arguments are about to start.

And the possible economic repercussions for Ireland are significant.

What is under discussion is a constitution that is intended to set the shape of EU policy for the next 25 years or so. Given that our monetary policy is now run from Europe, that the EU takes a role in co-ordinating and overseeing budgetary policy and that EU rules are increasingly important in areas such as competition policy, the framework set down in this constitution has obvious significance.

The first point of importance is that agreement on economic issues is still a long way off - indeed sources believe that Convention chairman Valérie Giscard d'Estaing has privately signalled that the June deadline may be difficult to meet, partly because of the gulf in the economic area between different parties.

A working group set up to advise the Convention on economic issues - and a subsequent plenary discussion - clearly highlighted fundamentally different approaches to inter alia economic co-ordination, the powers of the central bank, decision-making on taxation and how to handle social issues.

Among the key divisions were the appropriate powers for the Commission in implementing the Stability and Growth Pact, and, of course, how decisions should be taken on taxation. All the indications are that many of these issues will not be resolved before the final intergovernmental conference to discuss the outcome of the Convention and the treaty proposals, which may well be held during the Irish EU presidency in the first half of next year.

There is little point at this stage in parsing the language of the drafts already produced, but it is worth focusing on a number of the key points for Ireland.

The first is in how economic policy is co-ordinated and overseen.

Minister Dick Roche, who is the Government's lead player at the Convention, has proposed that the draft treaty text, which suggests that "the Union shall co-ordinate the economic policies of the Member States", be changed to "The member states shall co-ordinate their economic policies within the Union, establishing broad guidelines for these policies."

This may all sound a bit jesuitical, but the difference between the two texts encapsulates the gap between the more federalist view coming from France, Germany and the Benelux countries on the one hand and Britain, Ireland, Sweden and some of the applicant countries on the other.

One side of this debate, for example, wants more power for the European Commission in policy co-ordination and implementing the Stability and Growth Pact, while the other is fighting for competency to remain at a national level and among the Council of Ministers.

And there is also an important debate about the mandate and transparency of the European Central Bank.

Where the Irish interest should lie in many of these areas is open to debate. After all we are heading towards a new and enlarged union and the competitive and strategic issues for Ireland are changing.

One bottom line, of course, is the maintenance of our low corporation tax rate. This has been targeted by the likes of France and Germany, who want qualified majority voting (QMV) to be extended to some tax areas, including corporation tax. Ireland stands against this and argues that corporation tax issues should be the competence of national authorities, with the Commission left to police unfair competition under existing rules.

So far Ireland has been part of a bloc opposing the extension of qualified voting to this area which also includes Britain (which feels this would infringe its sovereignty), Sweden (which wants to maintain a high corporate tax rate) and Estonia (which has a zero rate and wants to keep it to attract foreign direct investment).

How this tax debate plays out is a key issue for Ireland.

So far the anti-bloc has remained solid, although there is always a danger that it could be broken up. For example, some sources believe that a proposal to implement a minimum corporation tax rate (as opposed to a recommended rate level) could weaken Swedish and possibly even British opposition and leave Ireland isolated in this area.

Some compromise in the Irish position may well be needed as this plays out, which will need to consider the new competitive environment as the applicant countries join.

Finally, of course, these talks are now progressing against severe tensions within Europe over the possible war with Iraq. This may yet present a new diplomatic landscape in the months ahead, which could fundamentally change the course of the EU in the years ahead.

What price a federal future given the current rift?