Economists began warning yesterday that serious damage had been inflicted on the newborn European Central Bank after leaders from the 15-strong European Union were forced to come to a compromise on who should be its first president. Foreign exchange markets could potentially turn volatile and test the newly set European parity rates that central banks would be aiming to keep in the run-up to the launch of the European single currency on January 1. With the world's largest foreign exchange market in London closed today for a national holiday, currency trading could be particularly prone to volatility as the market will be less liquid than usual. Analysts yesterday said the independence of the central bank appeared to have been damaged even before it had started operating as its first president, Wim Duisenberg, has already indicated he would step down before his full eight-year term is up, apparently in order to appease France's insistence he make way for Bank of France governor Jean-Claude Trichet. Yesterday Mr Duisenberg, who is 63, insisted he had come under no such pressure, and that it was because of his age that he envisaged stepping down in July 2002. 'I wish to emphasise that this is my decision and my decision alone and entirely of my own free will and, not under pressure from anyone, I have decided not to serve the full term. 'Also in the future the decision to resign will be my decision alone,' he said. 'This must be clearly understood.' But analysts expressed doubts over whether Mr Duisenberg really believed a split term was the right beginning for the euro. 'The damage is already done . . . This leaves a very bad taste,' Generale Bank economist Peter Praet said. The new single interest rate across the 11 countries selected to join the first wave of European economic and monetary union could be set at a higher level than would otherwise be expected, in order to try and repair the credibility of the new currency, Mr Praet said. Yesterday EU leaders attempted to put a brave face on the decision to allow a split term. At a press conference in the early hours of yesterday morning, European Commission President Jacques Santer said it was a 'great day for Europe, and a great day for European nations, and all those participating in this new adventure, in the best sense of the word.' British Prime Minister Tony Blair denied the deal was a 'fudge or fix', and said the 'sanctity' of the Maastricht Treaty - which sets down the rules for the single currency and the ECB - had been preserved. European Parliament president Jose Maria Gil-Robles, however, said he had very grave concerns over the outcome of the decision, and the marathon 11-hour talks that preceded it. The parliament this week now has to approve Mr Duisenberg's nomination, and while conceding the deal may be legal under the Maastricht Treaty, Mr Gil-Robles said he had 'no doubt' the agreement violated the spirit of the treaty. 'I would say that it is no good at all for the European Central Bank to begin like that,' Mr Gil-Robles said. 'Let us hope that the baby that has been born can recover and be stronger for the future.' Mr Blair however staunchly denied accusations that the deal represented a 'fudge' of the terms of the Maastricht Treaty, and insisted Mr Duisenberg had always intended to step down before his full term was completed. 'Mr Duisenberg has said to us that he does not want to serve for a period of eight years, but that at least he would like to see through the transition arrangements of the notes and coins.' This would imply that Mr Duisenberg, who will take up his post on July 1, 1998, would be expected to step down on July 1, 2002, allowing him to serve half of the eight-year term. Mr Blair said any decision, however, would remain Mr Duisenberg's alone, and should he change his mind there would be no compunction on him to leave after four years. 'He has made it very clear what his intention is,' Mr Blair said. 'It is his decision, and his decision alone . . . but he has indicated his desire to see through the introduction of the euro.' Analysts will be watching carefully today what effect the circumstances surrounding Mr Duisenberg's appointment will have. It had earlier been suggested that any perception that the independence of the central bank had been undermined by political pressure for a compromise deal could put pressure on the deutschemark, before spreading to other European currencies as they switch into safe-haven assets, such as the US dollar.