Doubts pushed aside as Emu gathers pace
Casting aside doubts about glaringly high debt levels, particularly in Italy and Belgium, Brussels confirmed that all the applicants for first- wave membership, except Greece, now meet the economic entry conditions laid down in the Maastricht treaty.
A special EU summit at the beginning of May is set to endorse membership of the Euro zone from next January for France, Germany, Holland, Belgium, Luxembourg, Ireland, Finland, Spain, Portugal, Italy and Austria.
The Commission's report makes it clear that membership of the Exchange Rate Mechanism is a pre-condition to joining Emu, but in a decision with significant implications for Britain, dropped its insistence that this must be for two years.
Britain, which was ejected from the ERM in 1992, has disputed the interpretation of the rule on ERM membership, arguing that currency stability over time, not technical membership, is the key. While Yves-Thibault de Silguy, the EU monetary affairs commissioner confirmed yesterday that formal membership of the mechanism is required, he did not specify for how long.
Jacques Santer, the Commission President, went further in explaining how Italy and Finland were cleared for membership, despite having been in the ERM for less than the prescribed time. "Guaranteed stability of exchange rates prevailed over participation in the ERM for two years," he said.
The Commission claimed in its report that EU economies have converged to the point where the Euro can now succeed.
Critics who claim the Maastricht criteria have been fudged to permit the realisation of a political dream will point to a separate report on convergence from the European Monetary Institute, the forerunner of the future European Central Bank.
The EMI praised overall progress, but singled out Italy and Belgium for criticism on failing to bring debt levels down. The EMI also raised doubts about the ability of France and Germany to consolidate their public finances.
In its own verdict, the Dutch Central Bank yesterday echoed concerns voiced in recent weeks by senior Dutch political figures about Italy. Its report concludes that genuine convergence, despite a healthy picture in terms of interest rates, public deficits and inflation, remains fragile.
But supporters of Emu rejected claims that fudging, or the convenient conjuncture of economic cycles, had brought about the right figures on the day. "This is the beginning of a new era. We are giving ourselves a monetary tool which will be one of the most important in the world" Jacques Chirac, the French President, said.
Mr Santer said the Commission had studied a range of factors to determine whether member states could stick to the tough fiscal disciplines they have achieved to qualify.
EU commissioner Sir Leon Brittan hailed the Commission's verdict as a powerful rebuff to single-currency opponents. "At first they argued that the economic situation meant that Emu could not possibly go ahead on time and would have to be postponed: they have been proved wrong. Then they said only a handful of countries would be in a position to qualify: wrong again ... today's report shows that the progress made has been so huge that no conceivable allegation of fudging can explain it away".
According to the Commission's assessment, all but Greece, of the member states who want to join in the first wave, have public deficits which are at or below the 3 per cent of GDP allowed by the treaty.
Debt in only four countries was below the 60 per cent of GDP target in 1997, but almost all have reversed the trend of rising debt, so qualify.
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