German court throws out monetary union challenge

THE remaining opposition in Germany to European monetary union crumbled yesterday as the country's highest court threw out legal challenges to the project and the enabling legislation passed the Bundestag in its first reading.

Dismissing petitions brought by professors as "clearly unfounded", the Constitutional Court removed the final legal hurdle. Manfred Brunner, the leading anti-Euro campaigner who drew less than a thousand largely neo-Nazi demonstrators to his rally at the weekend, conceded his petition stood no chance.

One of the two petitions swept aside by the court yesterday had been submitted by four German professors in January. It had called for a postponement of monetary union, arguing that prospective members, including Germany, had failed to meet the Maastricht criteria.

The second challenge had been filed by Hans-Heinrich Rupp, a university professor in Mainz, who claimed he was being denied his constitutional right to participate in decisions on monetary union. The court declared it had already ruled in 1993 that adopting the euro was constitutional if the euro criteria were strictly met and parliament decided to go ahead.

Last week the Bundesbank declared the 11 member states nominated by the European Commission had indeed fulfilled the convergence criteria, although it urged that Belgium and Italy in particular should make further efforts to reduce their public debt burdens.

Monetary union is no longer a political issue in Germany. "The conditions for a stable European currency were never as good as today," said Chancellor Helmut Kohl in the debate in the lower house. Some may disagree, notably Gerhard Schroder, the opposition Social Democrats' chancellor candidate, but no mainstream politician will vote against it.

The contrasting view came from London where Eddie George, Governor of the Bank of England, said the single currency could be marked by "strong tensions" if member countries did not make enough progress in structural reforms of their economies.

"I don't think we are talking about a situation that will cause the whole thing to blow up," he said. But he added that the pace of reform in jobs and goods markets had been very slow. "The consequences will be various forms of tension."

Mr George paid tribute to the efforts would-be members had made to meet the Maastricht criteria. But, questioned by MPs about the recent report on convergence from the European Monetary Institute, he said: "The report says there is going to have to be a lot more effort," adding: "The problems increase with the number of countries that take part."

He said the UK was not unusually sensitive to interest rate changes, one obstacle to British membership suggested by some Euro-sceptics. But he stressed the need for a stable pound, although not necessarily ERM membership, for two years before joining.

His comments came as a report showed sterling's growing reputation as a "safe haven" currency has led to a marked increase in sterling issuance volume. According to the International Securities Market Association (ISMA), which yesterday published its annual report, sterling borrowings totalled $67bn (pounds 40bn) in 1997, a year-on-year increase of more than 30 per cent.

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