`Budget rigging' risks euro timetable
Friday 31 January 1997
The Maastricht treaty set economic criteria for countries which wished to enter a single currency. But, now, European Union economists and statistical experts, monitoring adherence to the Maastricht criteria, are understood to have examined budget "massaging" in Italy, France, Spain, Belgium and Portugal.
The expert committee is understood to have looked at at least 10 cases in the countries in which one-off payments or temporary policy switches may have been used to ease deficits and debt, to help them gain entry to the single currency.
New signs that the convergence criteria may be weakly interpreted will renew calls from British Euro-sceptics for the Government to rule out joining the single currency in the first wave. John Major has stated that Britain would not join at the launch if the convergence criteria are not being strictly met.
Countries which want to qualify for the launch of European Monetary Union (EMU) must ensure that debt and deficit figures are in line by the end of this year. With the deadline approaching, the temptation to use creative accounting in several member states is intense.
The EU advisory committee, working closely with EU statisticians in Luxembourg, has looked at the legality of Italy's "Euro tax", proposed as a means of raising money to ease Italy's deficit. Roll-over bond payments which fund Italy's railways have also come under the committee's microscope.
And, it has looked at the decision in Madrid to freeze teachers' salary payments for 1997.
Belgium also faces criticism for attempting to ease its massive debt by asking local-government and social-security bodies to switch investments to government bonds.
The committee's findings will go to the European Commission, which will rule on any action.
The report will be closely studied, not just in Britain, but also by the governments of Germany and the Netherlands. The hard-line states are voicing mounting concern that the system of monitoring the convergence process is not impartial and may be designed to serve the interests of the states with economic problems.
There were signs in Brussels yesterday that pressure from countries who want the criteria to remain flexible may lead to a toning down of the committee's report. The European Commission has always been eager to accept a flexible interpretation of the Maastricht treaty.
France recently won endorsement from the Commission for a one-off payment from France Telecom to go towards its 1997 budget. The Bundesbank in Frankfurt and hawks in the Bonn finance ministry are still fuming over the Commission's decision, sayingBrussels overrode the view of the majority of member states.
Bundesbank officials said this week they would be watching further commission rulings on convergence very closely. The officials privately accused the Commission - and, particularly, Yves-Thibault de Silguy, the economics commissioner, who is French, of "dirty tricks".
If European member states do not adhere to strict convergence rules there are growing fears in Germany that German Euro-sceptics may challenge the EMU process in the German constitutional court.
If the Maastricht treaty is seen to be overridden for the sake of achieving the EMU deadline the constitutional court could rule that Germany's membership should not go ahead.
n Bonn (Reuters) - The Spanish Prime Minister, Jose Maria Aznar, arrived in Bonn for consultations on Madrid's determination to join the EU single currency at the outset, despite reservations expressed in Germany. Spanish delegation sources say Aznar is hoping for acknowledgement that Spain is on course to join EMU.
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