Creation Of The Euro: Political will triumphs over arithmetic

Analysis

THE figures unwrapped by aspiring members of the European Union's single currency may seem only dry-as-dust economic book-keeping. In fact, and just like the euro itself, they could not be more political.

For almost a year now, the question surrounding the euro has been not "if" but "when", and its main requirement that enough counties meet the qualifying Maastricht criteria to make the venture worthwhile.

That 11 countries are now willing and able to embark on the most ambitious venture since the 1957 Treaty of Rome is not a surprise. What is remarkable is that, given the political capital at stake, the book-keeping has been relatively honest.

There has, of course, been some sleight of hand. It remains mysterious quite how Italy, which for years regularly ran double-digit budget deficits, conveniently slashed last year's to a mere 2.7 per cent of Gross Domestic Product, well inside the 3 per cent Maastricht guideline. There is also the matter of Rome's public debt, 121.6 per cent of GDP and more than double the Maastricht ceiling of 60 per cent. But we are told, it is moving in the right direction (unlike Germany's rather less sinful 61.3 per cent which is in fact increasing).

But a euro without Germany is inconceivable. And for Italy, a founder member of the EU for whom participation in the euro is proof it belongs in the Premier League of European nations, missing the single currency launch would have been a terrible blow to the country's pride and self- respect.

Hence the challenge laid down yesterday by Romano Prodi, the Italian Prime Minister. In economic terms, Italy had met the spirit and the letter of the requirements, Mr Prodi said. Therefore any objections would have to be on political grounds. To which the EU Economic Affairs Commissioner, Yves-Thibault de Silguy, replied:"Don't worry." The final decision would be taken on economic grounds. It would not be "discriminatory."

A few hurdles remain. On 25 March, the European Commission will issue its recommendations, and two days later the Bundesbank, which has taken a jaundiced view of a "broad" and potentially softer Euro including Italy and Spain, will present its report on the matter.

This is the last real bump in the single currency's path, though probably not a big enough one to throw the project off course. The formal selection of participants will be made by EU finance ministers at the start of May.

But no one doubts the Euro will start on schedule in January 1999, or that it will have 11 members. The fighting henceforth will be over the details; in particular who will be President of the new European Central Bank, and the degree of political control over the ECB.

For the smooth run-up to the launch, Europe must offer special thanks to the business cycle. Inflation around the industrial world is minimal. At just the right moment, Germany and France, the two biggest economies, are gathering speed. Their expected growth of 2.5 to 3 per cent in 1998 will underpin EU expansion, helping to lift government revenues and reduce deficits everywhere.

The biggest risk to the euro now is a sudden slowdown that would see the weaker economies under intense pressures to take Maastricht-busting national measures to rekindle growth. Such a recession is unlikely, but not impossible.

For the "outs" and the "pre-ins" - Britain above all, but also Denmark, Sweden, and Greece inside the Union, and Switzerland and Norway who are not in the EU - the coming of the euro will further reduce the scope for independent economic management. Yesterday's figures banished what tiny doubts there were that come it will.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
Buttoned up: Ryan Reynolds with Helen Mirren in ‘Woman in Gold’
filmFor every box-office smash in his Hollywood career, there's always been a misconceived let-down. Now he says it's time for a reboot
News
people
News
Actress Julianne Moore wins the Best Actress in a Leading Role Award for 'Still Alice' during the 87th Annual Academy Awards in Hollywood, California
people
Sport
Ross Barkley
footballPaul Scholes says it's time for the Everton playmaker to step up and seize the England No 10 shirt
News
'We will fix it': mice in the 1970s children’s programme Bagpuss
science
Life and Style
2 Karl Lagerfeld and Choupette
fashion
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Customer Service Executive

£18000 - £22000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Retail Buyer / Ecommerce Buyer

£30000 - £35000 per annum: Recruitment Genius: Working closely with the market...

Recruitment Genius: Sales Executive - CAD Software Solutions Sales

£20000 - £50000 per annum: Recruitment Genius: A reputable company, famed for ...

Ashdown Group: Client Accountant Team Manager - Reading

Negotiable: Ashdown Group: The Ashdown Group has been engaged by a highly resp...

Day In a Page

War with Isis: Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria's capital

War with Isis

Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria
Scientists develop mechanical spring-loaded leg brace to improve walking

A spring in your step?

Scientists develop mechanical leg brace to help take a load off
Peter Ackroyd on Alfred Hitchcock: How London shaped the director's art and obsessions

Peter Ackroyd on Alfred Hitchcock

Ackroyd has devoted his literary career to chronicling the capital and its characters. He tells John Walsh why he chose the master of suspense as his latest subject
Ryan Reynolds interview: The actor is branching out with Nazi art-theft drama Woman in Gold

Ryan Reynolds branches out in Woman in Gold

For every box-office smash in Ryan Reynolds' Hollywood career, there's always been a misconceived let-down. It's time for a rethink and a reboot, the actor tells James Mottram
Why Robin Williams safeguarded himself against a morbid trend in advertising

Stars safeguard against morbid advertising

As film-makers and advertisers make increasing posthumous use of celebrities' images, some stars are finding new ways of ensuring that they rest in peace
The UK horticulture industry is facing a skills crisis - but Great Dixter aims to change all that

UK horticulture industry facing skills crisis

Great Dixter manor house in East Sussex is encouraging people to work in the industry by offering three scholarships a year to students, as well as generous placements
Hack Circus aims to turn the rule-abiding approach of TED talks on its head

Hack Circus: Technology, art and learning

Hack Circus aims to turn the rule-abiding approach of TED talks on its head. Rhodri Marsden meets mistress of ceremonies Leila Johnston
Sevenoaks is split over much-delayed decision on controversial grammar school annexe

Sevenoaks split over grammar school annexe

If Weald of Kent Grammar School is given the go-ahead for an annexe in leafy Sevenoaks, it will be the first selective state school to open in 50 years
10 best compact cameras

A look through the lens: 10 best compact cameras

If your smartphone won’t quite cut it, it’s time to invest in a new portable gadget
Paul Scholes column: Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now

Paul Scholes column

Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now
Why Michael Carrick is still proving an enigma for England

Why Carrick is still proving an enigma for England

Manchester United's talented midfielder has played international football for almost 14 years yet, frustratingly, has won only 32 caps, says Sam Wallace
Tracey Neville: The netball coach who is just as busy as her brothers, Gary and Phil

Tracey Neville is just as busy as her brothers, Gary and Phil

The former player on how she is finding time to coach both Manchester Thunder in the Superleague and England in this year's World Cup
General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?