Italy's EMU prospects still raise doubts

The chances of the single European currency going ahead on time next year were unchanged over the past week, with our panel again 87 per cent convinced it will start on time next January and seeing only 10 per cent possibility of it being delayed. Italy's prospects of joining on time remain the principal talking point, with markets alternately swayed by sceptical Bundesbank officials and then by supportive German politicians.

In the past week Gerhardt Schroder, the probable SPD candidate for Chancellor, said Italian membership is unlikely to be an issue in the German elections. Meanwhile Antonio Fazio the governor of the Italian central bank, said the Italian budget deficit was probably under 3 per cent last year, and the rejection by Eurostat of the Italian government's plan to reduce the deficit by including pounds 1bn worth of profits on gold sales had little real impact.

Next week the Italian Finance Minister visits Germany for talks with the Bundesbank and with Economics Minister Theo Weigel. Unemployment figures in Germany next Thursday will be also be closely watched.