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Mood of growing optimism

Monetary union prospects received a big boost this week from the surprising news that Germany's budget deficit was running a hair's breadth above the Maastricht limit.

A combination of statistical revisions and other adjustments agreed with Brussels has slashed the figure for the first six months of 1997 from the previously announced Maastricht-busting level of 3.8 per cent to 3.1 per cent, just outside the 3 per cent target.

As European finance ministers gather this weekend in Luxembourg, a mood of growing optimism seems to be pervading our panel of experts, albeit tempered with a little cynicism in some quarters.

Robert Prior at James Capel described the deficit figures as "surprisingly good" and certainly enough to increase the probability of EMU going ahead on time. However, he said the new numbers may prove somewhat optimistic about revenues raised by the state governments.

Julian Jessop of Nikko was even more sceptical. "I simply don't believe the 3.1 per cent figure," he said. It was difficult to reconcile with higher unemployment and lower taxes seen so far this year.