Germans find cause to celebrate Emu figures

PLANS to launch the European single currency next year received a fillip from calculations published yesterday, showing that Germany has comfortably attained the most important Maastricht criterion.

According to estimates prepared by the German Institute of Economic Forecasting and the Bundesbank, Germany's budget deficit amounted last year to about DM100bn, or roughly 2.8 per cent of Gross Domestic Product.

Although the figure may still change slightly, experts appear certain that the figure will not exceed the 3 per cent limit laid down by the Maastricht treaty. Final figures will be released by the government's Statistical Office next Friday. Their publication will swing the debate about economic and monetary union in favour of those backing the euro.

The new numbers, contradicting economic forecasts throughout last year, will be a welcome relief to Chancellor Helmut Kohl, who suffered a series of blows in recent weeks from German Euro-sceptics.

After years of silent grumbling, a movement of Germans opposed to Emu has been gathering momentum.

Opinion polls show that two-thirds of German voters are sceptical about the euro, though their sentiments have yet to be exploited by any political party in this election year.

Meeting the magic 3.0 target is likely to silence the most powerful critic, Prime Minister Edmund Stoiber of Bavaria, who has questioned Europe's readiness to proceed with the greatest monetary project in its history.

The government's success in balancing the books will also derail the campaign of four leading economists, who have taken their case to Germany's Constitutional Court. Much of their legal argument rests on claims that the German government has failed to put its house in order.

Only one of the four criteria will not be met. Germany's public debt will bust the Maastricht limit of 60 per cent, but Bonn's European partners have accepted the argument that this is due to costs incurred in eastern Germany.

The final arbiter of economic performance will be the Bundesbank, which is to present its assessment of Emu at a cabinet meeting in the middle of next month. The expected positive verdict from Frankfurt will be rubber- stamped by the government, and put to a vote in the two houses of the German Parliament on 23 and 24 April.

So far so good. The problem confronting all 11 prospective members of Emu is that both the Bundesbank and the German parliament have taken it upon themselves to judge not only Germany's merits, but also those of every other applicants. Thus, with the pressure off Germany, the focus is set to shift towards countries with more questionable credentials.

Step forward Italy. With a public debt ratio twice as high as allowed, and boasting a quarter of the European Union's debt burden, Italian finances are unlikely to receive a clean bill of health from the Bundesbank. If Frankfurt produces a scathing report about Italy, Chancellor Kohl will disregard it only at his peril. As sceptics never cease to point out, the strength or weakness of the new currency is determined by the weakest link in the chain.

Comments