Doubt over Germany's claims on deficit

Theo Waigel, Germany's Finance Minister, yesterday outlined figures for the state budget deficit of 2.25 per cent of GDP, well below the 3 per cent target specified under the Maastricht Treaty. However, The Independent's panel of experts said that including the social security and regional deficits, Germany would overshoot that target.

Many saw extensive selling of oil reserves by Germany yesterday, and of shares in the telecom privatisation, as an indication of Chancellor Kohl's determination or desperation. Eric Fishwick of Nikko Europe said: "We are sceptical that Germany can get within spitting distance of the targets, but the political will is there."

Robert Lind of ABN Amro said Mr Waigel's confirmation yesterday that Germany would overshoot this year's budget by DM18bn, implied an overall deficit of 3.4 per cent. However, the Bundesbank was arguing for a change to the criteria to emphasise not absolute numbers but sustained economic stability. "Germany sees that Italy will make it and this is an argument to keep them out. It's all a very tricky game."

Martin Brookes at Goldman Sachs said: "Germany is facing big political problems. If union happens it will be because politicians have won the arguments, not because the economics are right."