Creation Of The Euro: Magician of Bonn wins applause for balancing books trick

Kohl's victory

WITH a little tuck here, and a sleight of hand there, Germany conjured up a respectable budget deficit yesterday, scattering doubts about its ability to launch monetary union on time.

According to the long-awaited final figures published yesterday, Germany's budget deficit stood last year at 2.7 per cent of GDP under the European Union's accounting rules, or 2.8 per cent under German practice. Both figures are comfortably inside the confines imposed by the Maastricht Treaty.

"This is an impressive confirmation of the policies of the government and particularly Finance Minister Theo Waigel," Chancellor Helmut Kohl said. "I am certain the euro will come on time as agreed on 1 January 1999. And it will be a stable currency, just as we have been accustomed to for nearly 50 years with the [German] mark."

Relief was visible on the beaming face of the Finance Minister as he presented his flattering statistics, seizing the opportunity to attack "doubters and malicious critics". The latter might have included the gnomes of the Bundesbank, who at one point refused to allow Mr Waigel to walk away with their hoard. The attempted gold robbery was the most desperate of ploys he devised to fatten up the books. He lost that battle, and also failed to shuffle revenues from privatisations into the right page of the books.

Ultimately, it is the swingeing cuts imposed by the government that saved the day. Despite an export-fuelled boom, income from taxes grew little last year. At the last minute, the government slashed expenditure, trimming public investments by 10 per cent. That desperate action, representing 0.4 per cent of GDP, might be construed by evil tongues as the kind of "one-off measure" specifically forbidden in the Maastricht Treaty.

But given the trickery of some other prospective members of Emu it would be a small quibble. The other European states will happily turn a blind eye to Germany's failure to fulfil the criterion on cumulative public debt. In 1997, this stood at 61.3 per cent of GDP, a whisker above the Maastricht limit.

While economists grumbled about the quality of book-keeping, opposition politicians acclaimed the statistics.

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