James Barty at Deutsche Morgan Grenfell highlights the problem of the French deficit for this year, which could emerge from an "audit" being conducted by the new government at well above the Maastricht-imposed limit of 3 per cent of gross domestic product. If it ends up above 3.5 per cent "we get into problem territory, because it will be difficult to reconcile something that's closer to 4 per cent than 3", he said.
That could cause further problems for Chancellor Helmut Kohl's government in Germany, which has appeared ready to fudge the Maastricht criteria. There are signs that the Bavarian-based CSU, of which Theo Waigel, the Finance Minister, is a member, has hardened its stance on EMU. Phillip Chitty of ABN Amro Hoare Govett expects to hear some sabre rattling from the Bundesbank next week.