Amid growing signs of desperation in Brussels that monetary union may collapse, the European Commission was yesterday forced to admit that even Germany may have to be reprimanded this year for failing to meet key economic targets.
Yves Thibault de Silguy, the economics commissioner, made the admission at a press conference yesterday, intended to publicise the launch next week of a glossy publicity campaign on the single currency.
During what should have been an exercise in the positive promotion of monetary union, Mr de Silguy was pushed on to the defensive as he was asked about the growing signs of economic gloom issuing from Germany, the prime mover in the drive for a single currency.
In March the Commission will review the progress made by each member state towards meeting economic convergence rules laid down for monetary union in the Maastricht Treaty. Those countries which do not meet the rules face strong warnings from the Council of Ministers and may be given orders on how to cut spending.
Germany has shaken its partners by announcing that its deficit for 1995 was 3.6 per cent, well over the 3 per cent limit set by the Maastricht criteria. When the Commission made its assessments last year, only Germany, along with Ireland and Luxembourg, kept within the deficit limits. This year it is almost certain that only Ireland and Luxembourg will escape censure.
News of Germany's growing deficit has also undermined attempts by Theo Waigel, Germany's finance minister, to impose strict convergence rules on other countries who join the monetary union.
In November last year Mr Waigel suggested that, in order to ensure the single currency remains strong, countries should aim to keep their budget deficits as low as 1 per cent. Those who rise above the Maastricht target of 3 per cent would be severely fined, under what Mr Waigel termed a "stability pact".
It is expected that Germany, given its own economic problems, will now reduce its demands for such a pact.Reuse content