Bundesbank admits Emu fudge possible

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The Independent Online
Senior officials of Germany's central bank insisted yesterday that European Monetary Union should go ahead on time, even if it meant watering down the criteria for membership.

The comments come as speculation reaches fever pitch in financial markets and official circles that monetary union will have to be postponed. A delay would delight British opponents of the single currency, but would severely dent the European Union's credibility.

In an attempt to quell the speculation, three members of the council which governs the Bundesbank spoke out at separate events on Monday night. They said that Emu must go ahead, even at the price of fudging the Maastricht criteria.

Their statements give a new twist to the unfolding debate within Germany's ruling elite over Emu. Until recently, the Bundesbank has been the voice of fiscal rectitude, urging strict adherence to the limits set by Maastricht. The treaty says that states must keep their budget deficit below 3 per cent of GDP if they are to enter a single currency. The alternative, the gnomes of Frankfurt argued, was chaos and instability for Europe's brand new bank note.

Now the same people are going soft on the euro. "The 3 per cent deficit criterion should not be a knock-out criterion," declared Ernst Welteke, a member of the Bundesbank's Central Council.

Mr Welteke and two of his colleagues said the alternative to moving the goalposts would be postponement. This prospect was too horrible to contemplate, as it would push up the deutschmark, pricing German goods out of export markets.

There are, none the less, influential figures in the establishment who have come around to the view that the advantages of a delay would outweigh the disadvantages.

Rumours of a delay to the single currency have been circulating for several weeks. But yesterday's remarks did little to dissipate the confusion in the City. Martin Ely, of Bank of Tokyo-Mitsubishi, said: "We're not getting any clear message. Between the so-called wise men, finance ministers and politicians we're getting confused signals and the market's not sure which way to take it."

One theory for the Bundesbank's candour is that it has come under considerable pressure from the big German banks to calm speculation about delays. Speaking in London yesterday, Jurgen von Hagen, Director of the Bonn-based Centre for European Integration, said: "The banks and financial industry in Germany are fiercely in favour of Emu going ahead on time."