Prospect for EMU improves after the holidays

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The Independent Online
Two of The Independent's panel experts yesterday detected a modest increase over the past week in the probability of the single currency going ahead on time as the EU returned to work after the summer holidays.

Stephen King at James Capel emphasises the significance of the Ecofin ministerial meetings at Mondorf in Luxembourg next weekend. They will focus on the actual rates at which existing currencies will be converted into the common currency.

Most currencies are trading within 2 per cent of current par values but the Irish punt is almost 12 per cent above its par, largely because of the pull exerted on it by its much bigger neighbour - the pound. In such circumstances, no final decisions can be reached next weekend but ministers must be hoping for a rapid decline in the pound, pulling the punt back towards its continental partners.

At UBS, Richard Reed highlights a series of German economic indicators that will throw light on the possible upward pressure on German interest rates, which would inevitably have an adverse impact on other sensitive European economies and especially on France and Italy.

That country's latest labour market data are published on Tuesday, the GDP figures on Wednesday and cost of living and retail sales figures are both due for publication during the week.

The GDP figures are expected to show the economy picking up pace and helping to reduce the likely budget deficit. Unemployment, however, is likely to go on rising.

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