People are waiting for the next decisive move one way or another. My view is that the project will blow apart but not until next year."Although both the German and French equity markets rebounded to end the day showing gains, there was a widespread sentiment that Europe was, as one dealer put it, "not the place to be. There have to be less risk places to put your money."David Marsh of Robert Fleming Securities, said that a decision to postpone EMU "now looks increasingly likely - possibly in the next few weeks".Although the pound benefited from its recently-acquired "safe haven" status alongside the dollar and the Swiss franc, London shares failed to ride the same wave, the FTSE100 Index falling 58.5 points to close at 4,562.8.The London market took its cue partly from Wall Street where the Dow fell back in early trading but dealers also speculated that strong figures from the latest Purchasing Managers Index could point to an increase in interest rates. Robert Lind of ABN Amro, said: "That does have serious implications for the deutschmark, at the moment dealers perceive it as a dying currency. Rather than worrying about EMU blowing up the market has decided that the French election result means a much more broad-based EMU with a soft centre."He added that attempts to talk up the risk of a delay had been overdone. However, in the current state of uncertainty, others were more concerned that a delay now looked more likely. Alison Cottrell, chief international economist at Paine Webber, said that the risks to EMU starting in 1999 had risen immensely in the past fortnight.

The "central case", she added, had now shifted from EMU starting with a narrow band of countries to a delay in its launch.Robert Prior of James Capel said: "This is a further nail in the coffin of a credible and firm start for EMU in 1999. We are left with an EMU that permits wide membership and lack of credibility." He also cautioned that the markets had not fully priced in the risk of delay.Julian Jessop of Nikko Europe said: "The markets are nervous and split evenly between those who believe EMU will go ahead but on a diluted basis and those who don't think it will happen. Meanwhile the deutschmark also lost ground to a range of Continental currencies including the franc, lira and peseta as European bond markets held steady.The prevailing view in the foreign exchange markets was that the Left's victory in France would spell a softer EMU with both Italy and Spain qualifying for early entry. However, some commentators forecast that the return of the left to power in France and continuing turmoil in Germany could force a postponement altogether of the 1999 starting date for economic and monetary union, possibly within the next few weeks. In London, the dollar made strong gains against both the German and French currencies, as did sterling which was bolstered by speculation of a base rate rise later this week following strong manufacturing output figures.The pound climbed three and a half pfennings to reach DM2.8247 while it put on nine centimes against the French franc to hit Fr9.5261. That will form part of an expected pounds 4bn net fiscal tightening, with up to half of that aimed at the consumer.Comment page 21. The Deutschmark and, to a lesser extent, the French franc took a battering on the foreign exchanges yesterday as dealers concluded that the outcome of the French elections paved the way for a broadly-based single currency with a further fudging of the criteria for entry.

Described as a "brilliant" economist, he is known to have strong, if unorthodox, views on monetary union. While favouring the currency union, he has described the Maastricht criteria on fiscal deficits as nonsense.Gordon Brown's "welfare to work" Budget, the first by a Labour government for 19 years, will take place just two months after the landslide win on 1 May, with attention focusing not on whether he will tighten fiscal policy, but by how much.Economists said yesterday he will need to perform a difficult balancing act, keeping Labour's election promise not to raise the overall tax burden on ordinary people and demonstrating that the party can make a difference to unemployment and the quality of key public services - all while keeping financial markets happy.A central plank of the Budget will be a windfall tax on privatised utilities that will be used to fund a programme to cut unemployment. She is less well known in the City than the other three but is expected to bring an industry viewpoint to discussions.Willem Buiter, currently Professor of International Macroeconomics at Cambridge University, has held academic posts at Yale and Princeton in the US and at LSE and Bristol University. Previously group economic adviser at Barclays Bank after 14 years at the London Business School, he has also held appointments at the Securities and Investment Board and the Stock Exchange.DeAnne Julius, a US citizen who has lived in Britain since 1986, has been chief economist at British Airways since 1993, following a career that included spells at Shell and the World Bank in Washington. Andrew Cates, an economist at UBS, said he expected the first meeting to result in rates being left alone for the time being. He said: "Economic data over the past month has not been strong enough, in our view, to warrant a tightening of monetary policy, and we believe they will wish to wait and see what Gordon Brown delivers by way of fiscal tightening in his mini-Budget."The appointments of Professor Goodhart and Sir Alan Budd were singled out as particularly welcome.Professor Goodhart, currently Norman Sosnow Professor of Banking and Finance at the London School of Economics, has been called the best monetary economist in the country by his peers. As a former senior adviser at the Bank of England, he already has considerable experience of the workings of the institution.Sir Alan, chief economic adviser at the Treasury since 1991, is associated with the economic successes of the previous government and his appointment was viewed as giving a degree of continuity to policy making.

Professors Buiter and Goodhart are expected to vote at the meeting - the other two will not join until the autumn.Economists were divided yesterday on whether a quarter-point rise in interest rates would be announced at midday on Friday. It will be accountable to the Court of the Bank, which was strengthened yesterday by the appointment of Christopher Allsopp, a macroeconomics specialist at New College, Oxford.He replaces Lord Simon, the former BP chairman, who joined the Government recently as a trade minister with special responsibility for European competitiveness.The committee will have little time to prepare for its first monthly meeting, which takes place this Thursday and Friday. Eddie George also endorsed the appointments, adding: "I believe they will make a major contribution to the quality of the Bank's monetary analysis and to the authority of our monetary policy judgements."The role of the new committee was announced by the Chancellor on 6 May when he surprised observers by setting the Bank of England free to determine the level of interest rates. Professor Charles Goodhart, Dr DeAnne Julius, Sir Alan Budd and Professor Willem Buiter will join Eddie George, Governor of the Bank of England, his two deputies and two further Bank members in a nine-strong committee to determine monetary policy. The decision to hold the Budget on a Wednesday marks a break with the traditional Tuesday speech in order to avoid a clash with the handover of Hong Kong to China on 1 July.The MPC appointments, which were seen as non-political and likely to have a neutral impact on policy, were welcomed by City economists. The Chancellor put an end to speculation on two fronts yesterday, naming 2 July as the date for his first Budget and announcing the four outside members of the Bank of England's Monetary Policy Committee (MPC) which will be responsible for decisions on interest rates.