Hoisted by their own petard

Date: 05/06/1997

WHEN EU leaders set a deadline for creating the euro-zone of 1 January 1999, they did so in the belief that it was the only way to concentrate minds on the task ahead.

They feared that without a timetable to stick to, governments would not take the harsh measures necessary to get their finances in shape for the big day, putting off decisions which were bound to be unpopular with the electorate time and time again.

Saddled with a treaty which made no provision for a delay beyond the January 1999 deadline, those charged with turning the single currency project into a reality have been forced to stress over and over again that a failure to stick to the timetable would result in monetary Armageddon.

It need not. The shock of failure would certainly spark a crisis, but - like so many other EU crises of the past - it would eventually pass. However, getting the stricken patient back on its feet again would be far from easy given the do-or-die language in which the treaty was drafted.

One need only look back to 1996 to understand why the insistence on January 1999 or nothing was a mistake. The first target date for EMU was, after all, January 1997, but when EU finance ministers finally confirmed what everyone had known for months - that this first deadline would not be met - it caused barely a ripple.

Surely it would have been better to leave the door open to a delay beyond 1999 than endure the current endless speculation that the project may never be revived if the second target date is missed?

As Italy is demonstrating with its last-ditch efforts now to meet the Maastricht criteria, despite a widespread belief that it stands no chance of making it, the fear of being left behind while others forged ahead without them would have been enough to concentrate the minds of those struggling to catch up without putting the whole project in jeopardy.

Having said that, the 1999 deadline was eminently achievable, but only as long as the Maastricht Treaty was read correctly.

Many of the officials - including current Bundesbank president Hans Tietmeyer - who now talk so boringly about 3&percent; and no more are the very same people who spent long nights in 1990 and 1991 drafting the treaty.

This piece of paper does not talk about 3&percent;, but about aiming to get deficits down “close to” this target. Nobody in Maastricht in December 1991 could have foreseen what a totem 3&percent; was to become.

In fact, most countries are well on course to hit 3-3.3&percent; this year and several are on a continued downward trend. Why use smoke and mirrors to hit 3&percent; when proper financial management will get you down to 3.3&percent; and falling?

The treaty also anticipated a review of the previous two years of economic performance in the middle of next year and not a quick glance at the 1997 data in April 1998. This would have given everybody more time and a longer track record on which to be judged.

If the project does now fall at the last hurdle, no one will be more devastated than German Chancellor Helmut Kohl. But he will have only himself to blame, for it is the Germans who have turned 3&percent; into a fetish, igniting the flames which now threaten to engulf the project.

All this need not have happened. But now that is has, the public could be forgiven for thinking that if a marriage requires a shotgun, maybe the couple should not have got together in the first place.