France’s new Socialist-led government added more doubts to the European Union’s single-currency project Monday by delaying a key agreement to underpin the strength and stability of the “euro.”
French Finance Minister Dominique Strauss-Kahn insisted that Paris still wants the monetary union to start as planned Jan. 1, 1999.
But currency markets saw the EU’s failure to agree on a “stability pact” as a sign the euro’s launch may be delayed. Traders bought German marks in the belief the currency would remain Europe’s strongest.
The stability pact would levy heavy fines on any country running up a big budget deficit after the switch to the euro. Germany considers the accord essential to ensuring the euro is not undermined by loose-spending governments.
Leaders of the 15-nation EU tentatively agreed on the pact at a summit in December in Dublin, Ireland, and were to finalize it next week in Amsterdam.
“Everyone hopes we will be able to reach agreement in Amsterdam, but there is very little time,” said Dutch Finance Minister Gerrit Zalm, who chaired Monday’s meeting of finance ministers.
German Finance Minister Theo Waigel said that France would not be allowed to renegotiate the pact.
The victory by the French left has created uncertainty about the EU’s attempt to forge a monetary union. The new government won on pledges not to impose austerity measures seen as essential for its participation in the currency project.