They're in - but can they stay the course?

THIS weekend's summit will be a political event. Uncertainties about the economic success or failure of monetary union lie in the more distant future. After all the earlier fuss about which countries would clear the hurdles set by the Maastricht Treaty, it has been obvious for months that the single currency would start with 11 members, Greece the only wannabe that would not make the grade.

The official reports from the European Commission and European Monetary Institute, intended to pass judgement on which countries met the criteria set out in the Maastricht Treaty, turned out to be formalities. After heroic struggles, the would-be members hit most of the targets and little fudge was needed to sweeten the verdict.

In fact, only Italy and Belgium missed one criterion by a long way. Both have national debts relative to their GDP that are about double the Maastricht ceiling. It could take decades for both countries to reduce their debt burdens to acceptable levels, but politically neither could have been excluded from Emu until 2030 or beyond.

Yet the fact that the first-wave members managed to clamber over the Maastricht hurdles has only concentrated attention on the long-term economic prospects - or dangers. One question is how long the participants can keep up the tough budget discipline imposed on them by the treaty. With high unemployment, a rapidly rising pensions burden and an array of spending cuts and tax increases introduced to meet the Emu deadline likely to be reversed, it is hard to believe the political will to keep government deficits below 3 per cent of GDP will prove strong.

The big members will find it hardest. For smaller countries like Spain and Ireland whose economies are booming, and will boom even more when they reduce their borrowing costs to German levels, there will be little pain in fiscal discipline. For the wheezing German and French economies, more leanness and discipline is going to hurt. The Germans insist it is what they want anyway, and would favour a tougher stability pact - the post-launch budget corset, involving fines for profligate governments. The French do not, and the financial markets are poised for both political tension between the two Euro-behemoths and a surge in government spending.

An even more important long-term question mark hangs over how well the member economies will adjust to marching in lock-step with each other. The answer depends on whether they can replace the ability to adjust exchange rates and interest rates with other forms of flexibility. Many economists have their doubts about this, flexibility being a dirty word across much of the Continent. Productivity gains by European industries are one of the economic prizes offered by the single currency, but only the fittest member countries will win.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
election 2015The 10 best quotes of the campaign
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
Have you tried new the Independent Digital Edition apps?
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs General

Ashdown Group: Marketing Manager (B2B) - Romford - £40,000 + car

£35000 - £40000 per annum + car and benefits: Ashdown Group: Marketing Manager...

Ashdown Group: Helpdesk Analyst - Devon - £20,000

£18000 - £20000 per annum: Ashdown Group: Helpdesk Analyst - Devon - £20,000 ...

Ashdown Group: Data Scientist - London - £50,000 + bonus

£35000 - £50000 per annum + generous bonus: Ashdown Group: Business Analytics ...

Ashdown Group: IT Project Coordinator (Software Development) - Kingston

£45000 - £50000 per annum: Ashdown Group: IT Project Coordinator (Software Dev...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'