Italy and Spain fail EMU inflation test
The data casts fresh doubt on whether the Italian economy in particular will be in strong enough shape for the lira to take part in a single currency from 1999.
The critical question for Italy, Spain and Portugal will be whether they can get their inflation performance to converge towards their European partners during the next 12 months. EU leaders are expected to meet in April, 1998, to decide which nations will be in the first group to adopt the euro.
According to the Maastricht Treaty, member states joining EMU must have an average rate of inflation that does not exceed the inflation performance of the three best performing countries by more than 1.5 percentage points.
Eleven out the 15 member states currently meet this criterion, according to figures issued by the European Commission. However, Spain, Portugal and Greece fail the EMU inflation test, on the basis of new harmonised measures of inflation.
Italy meets the Maastricht criterion if only one month's figures are taken into account. But on the European Commission's preferred method of defining the Maastricht criterion to consider 12 months of data, then Italy still fails the inflation test, too.
The new EU inflation measure, the Harmonised Index of Consumer Prices, calculates inflation on a comparable basis, by measuring the price changes of the same goods in each country. At the moment national indices are based on very different baskets of goods, and on different statistical methods to calculate averages. The discrepancies between national measures and the new EU index are widest for Sweden and the UK. The HICP measures UK inflation at 2.1 per cent in January, whilst the most commonly used UK measure, RPI-X was 3.1 per cent.
The new HICP for Germany shows inflation at 1.7 per cent, compared to the German consumer price index which stands at 1.8 per cent. For France, the national and EU measures of inflation coincide at 1.8 per cent.
The three lowest inflation countries in January were Sweden, Finland and Luxemburg. An unweighted average of their inflation performance is 1.2 per cent, putting the Maastricht ceiling 1.5 percentage points higher at 2.7 per cent.
However, the Commission's preferred way to calculate the inflation criterion is to examine inflation performance over a 12- month period. The Commission released additional figures to show the average inflation performance of member states over the last year, on the harmonised index.
By this measure, the three best performing countries were Germany, Finland and Sweden, with an average inflation rate over the twelve month period of 1.1 per cent, producing a Maastricht ceiling of 2.6 per cent. Italian inflation averaged over the last 12 months is 3.7 per cent, well above the criterion if measured in this way.
A spokesman for economics and monetary affairs commissioner Yves-Thibault de Silguy said: "Using the harmonised index you get all the countries except Portugal, Italy, Spain and Greece qualifying."
- 3 Alton Towers crash: Four seriously injured and 16 guests trapped as Smiler ride carriages collide
- 4 Ann Summers survey reveals the UK's favourite sex position
Man on naked bike ride gets ejected after becoming aroused
Caitlyn Jenner's mother Ester thought her daughter, formerly known as Bruce Jenner, had transitioned for money
Charles Kennedy 1959-2015: A gifted, compassionate politician whose career was cut short by the 'demon drink' - latest news
Alton Towers crash: Four seriously injured and 16 guests trapped as Smiler ride carriages collide
Charles Kennedy dead: A guy once asked the Lib Dem leader who his favourite Muppet was and his letter response was wonderful
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
Michael Gove determined to scrap the Human Rights Act – even if Scotland retains it
Threat to scrap Human Rights Act could see UK follow Nazi example, warns UN official
Church of England 'one generation away from extinction' after dramatic loss of followers
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...
£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...
£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...
£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...