The currency conundrum: Brown warms to euro as US fears challenge to dollar

Washington is wary of a new rival across the Atlantic, writes Mary Dejevsky

Washington - The coming 50th anniversary of the Marshall Plan is set to coincide with two landmark events in Europe: an agreement between Nato and Russia that will give a green light to the expansion of the alliance into Central Europe, and the conclusion of the European Union's intergovernmental conference (IGC), with agreement on arrangements for the eastward expansion of this grouping too.

Within months, a decision is also due on which EU countries will qualify to pioneer monetary union, a crucial stage that will make the project of the single European currency seem both real and imminent.

On the other side of the Atlantic, this is providing what officials call "a wake-up call". The Washington elite is taking a closer look at what is going on in Europe, and its feelings are mixed. At a recent conference on transatlantic ties, Strobe Talbott, Deputy Secretary of State, said: "The European community is changing ... but there are challenges from integration." Among them was the risk that a stronger EU, unified by a single currency, could be more foe than friend.

Alluding to the "super-regions" of Orwell's 1984, Mr Talbott said: "The wrong kind of regional cohesion could lead to the wrong kind of interregional conflict." He went on: "We would encourage Europe to embrace the most inclusive version of what integration means. Co-operation within regions", he said, had to be matched by "cooperation between regions." What the US hopes for from European integration is trade and investment opportunities for American business, and the usual inference is that so long as those are delivered, EU integration is a good thing all round.

But there is also a sub-text. EU diplomats and others sense a danger that somewhat hazy talk of more trade masks a vision of Europe that is of a grouping somewhat like the US, but internationally weaker and more compliant. A State Department official, Antony Wayne, expressed the US view like this: Europe would be a grouping of prosperous, democratic, free-market states and, as such, represent the "completion of the Marshall Plan". Beneath this reference, though, seems to lurk a proviso: a US of Europe should under no circumstances rival the original US of America.

After the war, when Marshall aid was gratefully received, the risk of rivalry was inconceivable. Now, recent disputes - over Gatt's transformation into the World Trade Organisation, over US laws extending US sanctions to foreign companies trading with Cuba, and accusations both ways over state subsidies to the aircraft and defence industries - shows how easily rivalry could escalate. Europe is also increasingly prepared to stand up to the US.

The imminent deal on Nato expansion also causes similar friction, though it is less clear-cut because of divisions within the US administration and among Europeans about details. In US minds, however, there are points where questions about Nato expansion and EU expansion intersect.

"EU integration is not necessarily going to undermine the transatlantic link, but we need to be aware of the risk," said a Defense Department official, Robert Osterhaler, at a post-Marshall Plan conference. Some - in Washington as in Europe - might think this is all to the good, though both Mr Osterhaler and his State Department colleagues went out of their way to reject any weakening of the US defence commitment for the time being.

They also reject the suggestion that US commitment to Nato enlargement is anything less than "complete". One idea here is that European countries which are not qualified or which the US does not want in Nato for the time being could be placed on a fast track to EU membership. This option, tantamount to the US manipulating the EU in its own interests, is rejected by the British ambassador in Washington, Sir John Kerr, who said it would be "dangerous" for EU membership to be granted to certain Central European countries as a sort of "consolation prize".

In an indirect warning to the US about patronising Europe 50 years after the Marshall Plan, he said: "The United States should be wary about asking the EU to go faster [towards integration]: it is not US money, but EU money ... This is a grown-up negotiation between grown-up people."