German boost for EMU

European finance ministers and central bankers are meeting in Noordwijk this weekend to discuss the future of the single currency after a quiet week for EMU speculation in the financial markets.

But it was nevertheless a significant week on the single currency front. Bruce Kasman of JP Morgan said: "This week may turn out to have been the week in which the wave of EMU pessimism crested."

German data on manufacturing orders and industrial production were surprisingly positive, reinforcing the view that German growth is bouncing back and that delay might be less likely after all. As a result our graph shows bond yields for Italy and Spain converging on Germany once more.

Chancellor Helmut Kohl's announcement that he will be standing for re-election caused little market response but analysts claimed it was extremely important.

Mr Kasman commented: "It takes one of the major risks out of the system."

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