EMU allies bid to crush speculation over delay

Date: 03/04/1997

By Tim Jones

MONETARY chiefs are set to launch an all-out campaign to quash rumours that the kick-off date for a single European currency will be delayed beyond January 1999.

They will point to key economic indicators which suggest that all but one member state could still qualify for membership of the euro-zone in the first wave.

As they head for the Dutch coast for their biannual informal meeting tomorrow (4 April), most Union finance ministers believe EMU will appear on time and with all the budgetary entry rules satisfied.

“We are convinced that we can start on 1 January 1999 with a strict application of the criteria,” said Dutch Finance Minister Gerrit Zalm, who will chair the meeting in the town of Noordwijk.

With only a year to go until the short-list of EMU qualifiers is drawn up, the Commission's spring forecasts - due out on 23 April - will be closely watched.

The recent surge in the US dollar alone should add as much as 0.4&percent; to EU gross domestic product if it is sustained over the year, according to economists at the European Commission.

As a result, they now expect EU gross domestic product to grow by at least 2.5&percent; this year rather than the 2.3&percent; they forecast last November.

Economics Commissioner Yves-Thibault de Silguy believes that renewed growth and a revival of tax revenues should put Belgium, Germany, France, Spain, Ireland, Luxembourg, the Netherlands, Austria, Portugal, Finland, Sweden and even the UK and Denmark on course to qualify for EMU entry.

Experts are still ploughing through the details of last week's Italian mini-budget before they decide whether to give Rome their blessing.

In an interview with European Voice, Zalm was equally confident about the outlook for the

EU economy. “Growth will accelerate this year,” he said.

“It will be across the board, but particularly from the export side and because of low interest rates. It should not be too difficult to reach [2.3&percent;] and maybe a bit higher.”

The key to the success or failure of the single currency project is now Germany, where the costs of financing rising unemployment - with an extra 500,000 people added to the dole queues in January alone - have sparked fears that Bonn will be unable hit the 3&percent; of GDP target for its budget deficit.

Although Commission forecasters expect unemployment in Germany, once seasonal factors are stripped out, to go on rising slowly until the middle of the year, it should then start to dip, hitting around 4.3 million by December.

This, they believe, will bring Bonn's deficit target of 2.9&percent; of GDP for this year within reach.

At Noordwijk, officials will tell ministers that next year's decision to trigger the beginning of EMU may not be taken until as late as May.

“The end of April might be feasible, but there are a lot of things which have to be done before we finish the decision-making,” said Zalm.

A first assessment of countries' EMU-readiness must be carried out by the Commission and the European Monetary Institute. This will be followed by consultation with the European Parliament and a formal decision by finance ministers. Only then will a summit launch the euro.

Zalm admitted the process could stretch into May, but “not far into May”, stressing that would leave only seven months to create the European Central Bank.

“We have a natural deadline in that we must finish in time to allow for the preparation of the central bank, but there is also the problem that we need reliable figures for 1997 and we would also like to have an idea about budgetary positions in 1998. This means we cannot start much earlier than March and we cannot end much later than April,” he said.

“It is quite a compressed time schedule.”