Formula devised to rescue ‘stability pact’

Date: 12/06/1997

INTENSIVE diplomatic manoeuvring looks set to lift a French government threat to delay approval of the long-sought 'stability pact' for maintaining budgetary discipline in a single currency zone.

In the last days before the EU summit in Amsterdam, the Dutch presidency and the European Commission have produced a face-saving compromise for new Finance Minister Dominique Strauss-Kahn which would allow Paris to sign a deal that it considers to be anti-jobs.

The pact, without which EMU cannot work since it establishes all the ground rules for fiscal policy, is due for approval at Amsterdam in the form of three texts.

The first two regulations - establishing the budgetary targets which must be met in the euro-bloc and setting deadlines for meeting them - have legal force. Once they are approved by the summit, they will have to be formally adopted at a subsequent Council of Ministers. A summit resolution, which commits governments to interpreting the pact strictly, is simply a political pledge and not law.

To win over the French, the Dutch presidency and the Commission have come up with a second resolution for the summit under which prime ministers would promise, as pact signatories, to favour job creation.

By coming up with this non-binding approach, the Dutch have got round the need to convene another special meeting of finance ministers just before the summit.