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Professor power takes on EMU

Four academics took the fight against the euro to Germany's highest court yesterday. In theory their action could stop monetary union in its tracks, but, as Imre Karacs explains, that is the least likely outcome.

In a country where almost nothing happens without a lawsuit or three, it was always inevitable that the German government's attempt to abolish the Deutschmark would be dragged through the courts. The plaintiffs in the latest case of Germans versus Germany are eminent academics: three leading economists and a legal expert. The venue is the Constitutional Court in Karlsruhe, whose crimson-robed judges are renowned for their Delphic pronouncements.

In a 350-page deposition handed over to the porter at Germany's highest court yesterday, the professors argue that a politically disunited Europe does not need currency union. EMU, in their view, is therefore not only a superfluous, but also a dangerous exercise.

In their learned opinion, member-states have failed to meet the criteria laid down in the Maastricht Treaty. "All the required conditions for a successful start and operation are clearly absent," said one of the petitioners, Wilhelm Nolling, a former member of the Bundesbank Council. "Europe is simply not ready for such an adventure or experiment."

Germany, in their view, has itself failed to fulfil the entrance requirements, coming close on certain points only by "window-dressing". They point out that the budget deficit for the qualifying year of 1997 exceeded the 3 per cent limit laid down in the Maastricht Treaty. The latest independent estimates put it at 3.1 per cent, when measured in accordance with the EU's accounting rules.

The ratio of public debt, at 61.8 per cent of GDP, also busts the 60- per-cent threshold.

Even the other two Maastricht criteria - inflation and long-term interest rates - leave the academics unimpressed, because they believe them to be unsustainable amid Germany's record unemployment.

This is a bleak picture, described by the investment house Deutsche Morgan Grenfell as being "wildly out of touch with reality". It is also, to a large extent, irrelevant. To some degree, the Maastricht Treaty is open to interpretation.

In 1993 the same court in Karlsruhe ruled, at the behest of one of yesterday's petitioners, that economic and monetary union in Europe would have to be based on the "strict and narrow" interpretation of the Maastricht Treaty.

Just how "strict and narrow" is for the Bundesbank, the German legislature and representatives of the EU member- states to decide. As a result of the first Karlsruhe judgment, Germany's two-chamber parliament, the Bundestag and the Bundesrat, have the power to scupper EMU. They will take a vote in April, on the basis of the expert opinion of the country's central bank. Since the Bundesbank is broadly in favour of EMU, and all the main political parties overwhelmingly supportive, the outcome of April's votes is a foregone conclusion.

Under these circumstances, the best the academics can expect from the Constitutional Court is mild rebuke for European governments. The most likely message from Karlsruhe will be deafening silence.