BY CARL-ERIK ISACCSSON
STOCKHOLM, Sweden - In a not-so-unexpected move, French president Jacques Chirac and Prime Minister Lionel Jospin announced Paris's own candidate to head the European Central Bank (ECB) November 4. Jean-Claude Trichet, currently head of the Bank of France, contends for this post against Wim Duisenberg, the Dutch head of the European Monetary Institute, forerunner to the ECB, which is projected as part of establishing a European monetary union (EMU).

Paris's proposal triggers an open competition for the presidency of the bank and reflects conflicts over what kind of monetary policy should be applied in the future euro currency zone. The proposal for Duisenberg had been backed by Bonn.

According to the Financial Times of London, the proposal stunned the European Commission, the European Union's (EU) executive body, which had hoped that Paris would "refrain from any action that could complicate an already difficult final run- up to European economic and monetary union."

The Dutch government said it would contest the initiative and said it believed "a broad Europe-wide consensus" existed that Duisenberg should accede to the job from his current role. A statement by the Dutch government said "We see no reason for the nomination. Mr. Duisenberg's reputation is undisputed and by opening a discussion at this time the process and credibility of EMU is undermined."

German bankers and politicians reacted with shock and refuted the idea that the move was part of a deal between Bonn and Paris. Norbert Wieczorek, German Bun-destag EU committee chair said, "After the decision of Duisenberg had more or less been taken, it is not helpful to propose another candidate."

Paris floated rumors that a deal with German chancellor Helmut Kohl guaranteed a French president of the bank in exchange for locating it in Bonn. Kohl visited Paris for informal talks with Chirac and Jospin November 5. A Financial Times article described Trichet's nomination as "a calculated gamble which has the fingerprints of Jacques Chirac, Francés Gaullist president all over it... Mr. Chirac has sent a firm signal that the French are determined to stop European economic and monetary union being settled purely on German terms."

Several important decisions are supposed to be taken in the next round of talks on the single currency. These include the selection of the countries that meet the entry criteria for EMU, the composition of the executive board of the ECB, and, indirectly, the interest rate policy within the "euro" zone. Paris favors having Italy within the EMU, to hinder competition from a weak lira. Bonn and the Bundesbank, the German central bank, have hinted at worries that having Rome within EMU would force higher interest rates in the euro zone, to defend the European currency.

Although Paris followed suit in the recent interest rate hike by Bundesbank, aimed at converging interest rates in the euro zone, it is not keen on further increasing interest rates, as that might stymie the weak economic recovery in France. The nomination of Trichet is a sign of the battles over monetary policy that are to come.

Socialist Party prime minister Jospin is in favor of an Euro that is not overvalued against the dollar and yen, so as to stimulate French exports, which he claims will create jobs in France. He was forced to go along with the conservative president, however, and propose a head of the European Central Bank whose commitment to the "franc fort" (strong franc) is well known, in order to strengthen Paris's position in relation to Bonn. Although Jospin's government depends on stronger economic growth to be able to meet the criteria for the EMU, it was compelled to go along with Chirac's gamble, even at the cost of slower growth rates. And as this was playing out, thousands of truckers had halted transport across France, demanding wage raises that were largely won.

Meanwhile, at a November 17 meeting of EU finance ministers, the British government was angling for a role in a projected policy-coordinating forum of EMU members, despite having announced it will not join the EMU on the first round in 1999. "You can't have a voice in a committee that is managing a currency that is not your own currency," declared French finance minister Dominique Strauss-Kahn. London insisted that the finance ministers' meetings remain the principle decision- making body on economic policy.

German finance minister Theo Waigel took a softer tone toward London, stressing that the policy forum should be informal and not cut across the regular meetings of all 15 EU finance ministers.

Carl-Erik Isacsson is a member of the metalworkers union in Sodertalje, Sweden.  
 
 
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