LONDON -- Less than three weeks after the merger of the London Stock Exchange and the Deutsche Bourse was announced, the initial excitement over the proposal is giving way to suspicion, if not downright antipathy. But so far, no one involved dares admit that the merger might collapse.

This week will be critical for the success of the merger, which must be approved by three quarters of shareholders of both the LSE and the Deutsche Bourse, as well as by regulators in both London and Frankfurt.

The Deutsche Bourse's supervisory board will meet to discuss the merger later on Tuesday, although it may postpone a vote until all the details are finalized. Reports on Monday suggested that around 60% of the 21 board members were in favor of the merger in principle, but wanted clarification on key details.

Meanwhile, there is talk of even more fundamental disquiet among many of the LSE's 289 members, who will vote on the merger plan in September.

Like two bickering children, each side complains that it got the worst of the deal.

The Germans fear that the new exchange, to be headquartered in London, could spell the end for Frankfurt as a financial center.

Dieter Posch, the economics minister of the state of Hesse and the regulator for the

Frankfurt Stock Exchange

, has made it clear that he will not agree to any merger that he thinks would diminish Frankfurt's importance. He has given Werner Seifert, the Deutsche Bourse chief executive and chief executive designate of the new

iX

, a list of 14 questions to answer before he gives his decision.

In London, meanwhile, the central fear is that the location of the market for technology stocks in Frankfurt will mean a slow migration of the U.K.'s New Economy to continental Europe. George Cox, director of the

Institute of Directors

, went so far as to call it a "takeover" of the LSE by the Deutsche Bourse.

There is little chance of London winning any concessions on this issue, however. In fact, the Germans have themselves been looking for further guarantees that the growth market will remain in Frankfurt. In particular, they want the headquarters of the new joint venture between iX and

Nasdaq

to be in Frankfurt.

Hans Reckers, president of the Hesse state bank and a member of the board of

Bundesbank

, has indicated that he wants guarantees that the high-growth market will stay in Frankfurt in the long term, otherwise business would inevitably migrate "to the bourse's headquarters in London as a bigger financial center."

A Question of Money

Unsurprisingly, the issue of currency has also been a source of dispute. This was bound to be a sensitive issue in the U.K., where the euro is a political hot potato, and the issue was exacerbated by the ambiguity of the statements made at the time the merger was announced.

The incoming LSE chairman Don Cruickshank insisted that it would be up to individual companies whether they wished to have their shares traded in euros or sterling, but also suggested that the eventual "aim" was for all trading in European stocks to be done in euros. Cruickshank was forced to retract this latter part of the statement before a Parliamentary committee last week.

The most vociferous criticisms of the merger have inevitably come from elements within the U.K.'s

Conservative Party

, which is by nature deeply suspicious of anything European, especially the dreaded euro.

Michael Portillo, Chancellor Gordon Brown's opposite number in the Conservative Party, said this week that the merger could "threaten London's position as a global financial center." And Lord Lamont, the former Conservative chancellor who presided over the U.K.'s exit from the Exchange Rate Mechanism -- where Europe's currencies were fixed within a band -- in 1992, said he would vote against the merger in a

House of Lords

debate scheduled for Wednesday.

Deutsche Bourse's Seifert boldly stated at the May 3 press conference when the creation of the new superbourse iX was announced that, "We have a 100-page agreement

covering the minutest details, and we have a blueprint of the new market ready." Such confidence is now beginning to look a little premature.