Splits on euro reveal Jospin's weakness

John Lichfield looks at the fall-out for the French following Amsterdam; `The price has been severe strain - even outright distrust - within the Franco-German alliance'

Paris - It has not been an impressive first two weeks in power for the French Socialists.

Tuesday's zigs and zags in Amsterdam - with three different, publicly stated policies on Emu on the course of one day - capped 10 days of incoherence, drift and indecision on European policy.

Some friendly French commentators suggest this has been a deliberate kicking-up of dust, to buy the new government time for the far tougher decisions on Emu which lie ahead.

But much of the dust has been kicked into the face of a German government which faces its own struggle for domestic survival. The personal relationships, at the heart of the alliance between France and Germany, have rarely been more strained.

It can be argued that Lionel Jospin, the new French Prime Minister, was unlucky with the international agenda. He had only two weeks to prepare for the EU summit in Amsterdam. But the inconsistencies of the past week suggest a more fundamental problem.

At one level, this is a government unprepared for office because it did not expect to win the election. More than that, it is a government struggling to make sense of a campaign agenda loaded with populist and contradictory ideas. No one expected to have to put them into practice within two weeks of taking power.

Thus, the Socialists promised to enter the single currency on time; to avoid all new taxes and spending cuts to meet the Emu guidelines; and to shift the whole direction of Emu policy away from rigid monetarist orthodoxy towards growth and job-creation.

Mr Jospin has promised to govern openly and honestly and carry out in office what he promised in opposition. But he must know that it is not possible to deliver all these promises at once, leaving aside the pledges to increase unemployment benefit and the minimum wage and create 700,000 subsidised jobs.

Thus, the European affairs minister, Pierre Moscovici, was, in a sense, only restating policy when he said on Tuesday that the government would have to audit the public finances before it knew whether or not it could join Emu. Even without the cost of the campaign promises, the French budget is said to be heading for a deficit this year of between 3.8 and 4 per cent of GNP, well beyond the Maastricht guideline of 3 per cent.

The finance minister, Dominique Strauss-Kahn, was also, in a sense, stating the obvious when he said France needed a generous and flexible interpretation of the guidelines to keep Emu on track.

Finally, with the markets and German officials wobbling all over the place, a rattled-looking Mr Jospin was also restating government policy when he gave a "profound commitment" on Tuesday night "to achieve the single currency on time".

On a generous interpretation, this was a case of newly-minted ministers speaking with the candour of opposition spokesmen. On a more realistic interpretation, the new French government is split down the middle on Emu policy.

On the most cynical interpretation, the whole performance has been choreographed to put pressure on the Germans and others to allow France more space within the Maastricht rules. Whatever the case, public agonising and disagreement is unlikely to help anyone, if it convinces the bond and currency markets that Emu is dead and waiting to be buried.

The timing of Mr Moscovici's comments especially infuriated the Germans. Chancellor Kohl's fragile domestic position on Emu had already been weakened by Mr Jospin's decision to take hostage the Stability Pact on budgetary discipline within the Emu.

The row had been resolved the day before on German terms, with Mr Jospin accepting vague new texts on job creation and macro-economic management. But Chancellor Kohl's opposition, including some from within the senior ranks of the Bavarian Christian Democrat, seized gratefully on the row as further proof that a franc-deutschmark marriage would be a disaster.

Imagine, therefore, the Chancellor's mood when the next day a senior French politician suggested Paris was considering leaving him and every one else at the altar.

Mr Jospin's decision to back down on the Stability Pact has been treated relatively kindly at home. The centre-left newspaper Liberation said he made a serious mistake in trying to extort better terms from Mr Kohl at the Franco-German summit in Poitiers. It has also emerged that President Jacques Chirac did threaten last week to cause a full-scale crisis of "co-habitation" if Mr Jospin carried out his threat to block the Stability Pact in Amsterdam.

There has been some grumbling among Communists (though not from the party leadership). Otherwise, most commentators have accepted Mr Jospin gained a little ground in awkward circumstances.

As Le Monde pointed out, however, the price has been severe strain - even outright distrust - within the Franco-German alliance.