Currency crisis in emerging markets `might help EMU'

City economists remain convinced that European Monetary Union will start on time, despite this week's fears of a meltdown in world financial markets and the gulf that has opened up between the Government and the Conservatives over the single currency issue.

The Independent's panel of experts now rate the chances of EMU being up and running in 1999 at 83 per cent, fractionally higher than a week ago.

Turmoil in the Far East financial markets is causing concern and, according to Robert Prior at James Capel, if the speculators turned their attention to Europe, the Greek drachma and Italian lira would be the most likely targets.

Michael Lewis at Deutsche Morgan Grenfell said the currency crisis in emerging markets might even help the EMU cause, provided it does not undermine the dollar. The reason is that it has reduced the need for a rise in US interest rates which could have imposed further strains on some European currencies, most notably the French franc and the lira.