The final institutional building block in the edifice of the single European currency was last night put in place by the European Council at Luxembourg, which agreed in principle on how its members and non-members will decide on economic policy. This is a highly significant achievement, which deals effectively with a potentially very divisive issue. It only remains now to decide next May on which states should participate in the project, according to the criteria laid down in the Treaty of Maastricht. Economic and political planning must now proceed on the assumption that EMU will begin on time in January 1999, probably with 11 states, Ireland included, as members.
The agreement is based on constructive ambiguity and good faith among the 15 member-states. A politically adept compromise, it postpones rather than resolves the question of precisely how economic policy matters arising from management of the single currency will be decided. Contentious subjects will be dealt with on a case by case basis by those in EMU and those outside it. This is sensible - and admirably in keeping with the celebrated pragmatism of the British government which made most of the running on the matter. It means that experience will dictate the agenda rather than continued reference to arcane rules of procedure and decision-making. It also means that the British will be less isolated, more closely involved and therefore more likely to join EMU sooner rather than later - an outcome that is very much in Ireland's interest, as the Taoiseach pointed out after his meeting with Mr Blair last night.
High politics is involved. The single currency is an immensely ambitious project, with profound implications for members and non-members alike within the EU - and for global economic and monetary management, as is now being increasingly recognised around the world. EMU will alter the balance between reserve currencies as the euro competes with the dollar and the yen. It will necessitate changes in the operation of international institutions such as the Group of Seven industrial countries and the International Monetary Fund. An emergent internal agenda is likely to deal with fiscal and tax harmonisation and in the longer term with wider questions of economic governance within Europe.
Yesterday's parallel agreement in principle by the Luxembourg summit on a process of continental enlargement, to be spelled out in detail today, adds greatly to the significance of the agreement on how to manage the euro currency area. While enlargement will be a lengthy process, stretching quite easily over 15-20 years, the co-ordination of European economic policy will proceed from the beginning of the euro, setting standards and benchmarks that will certainly influence all European states.
Ireland is set to be a member of the EMU from the beginning, with access to the inner core of decision-making, according to the relatively inclusive formula agreed yesterday in Luxembourg. Preparedness must now become an urgent priority for public administration and private businesses alike. Ratification of the Amsterdam Treaty by referendum in the spring will provide an opportunity for the Government to bring these preparations more fully to the attention of the electorate.