A Treasury paper, released to The Independent under the code of open government, suggests that Germany is unlikely to create the "sustainable public finances" required to meet the convergence criteria for membership of a currency starting in 1999.
The Cabinet decided on 23 January that it was "very unlikely, though not impossible" for a single currency to go ahead on schedule.
John Major said that if the currency went ahead on a fudged criteria, "we would not, of course, be part of it". He has also said that if he were Prime Minister at that time, he would do his utmost to block its creation because it would threaten to increase unemployment in the United Kingdom.
However, there is to be no single veto on the creation of the currency and the candidature of individual member states will be taken by qualified majority vote by the middle of next year.
According to the Treasury, the basic facts and analysis on which the Cabinet took its sceptical decision included "information received in confidence from other governments, or whose disclosure could cause harm to our good relations with other governments". That information is excluded from the paper provided to The Independent.
But the Treasury's analysis clearly shows that Germany is not expected to meet key criteria on deficits and debt to qualify for single currency membership. The paper says: "The [European] Commission November forecasts for 1996 predicted that four member states (Denmark, Ireland, Netherlands, Luxembourg) were likely to have a general government deficit below the 3 per cent reference value in 1996, and three member states (UK, France and Luxembourg) were likely to have a debt level below the 60 per cent reference level at end 1996.
"The outlook for deficits in 1997 is probably the greatest area of uncertainty... So it is not surprising that there is a range of forecasts, eg for Germany 2.9 per cent to 3.5 per cent." And Germany is forecast to have a debt ratio close to 60 per cent.Reuse content