Doubts raised over EMU deal

Date: 05/09/1996

PRESSURE is growing on the European Commission and leading member states to tie up the loose ends of the single currency project as the make-or-break year of 1997 looms.

Crucial budgetary decisions must be made in the coming weeks in Germany and France if the two countries essential to the creation of a monetary union are to meet the entry conditions for the 'Euro' club.

Doubts about the ability of an unpopular French administration to deliver the necessary spending cuts have undermined a tender franc.

For its part, the Commission is putting the final touches to its proposal for a fiscal 'stability pact' aimed at enforcing budgetary rigour for monetary union members after January 1999.

Originally banking on agreement to its plan at the informal meeting of EU finance ministers and central bank governors in Dublin on 21 September, Commission officials are now more reticent.

Bonn, which is insisting that the stability pact be all-but automatic in its capacity to impose sanctions on errant members, still has concerns about the Commission proposals.

Germany wants a gap of just six months between detecting an excessive budget deficit and the imposition of sanctions, while the Commission is settling on a nine-month grace period.

Bonn is also unhappy that the Commission has failed to define in figures the kind of recession which would allow member states to be exempted from punishment for fiscal errors.

As a result, monetary officials are playing down the chances of a full agreement on the pact at the Dublin meeting.