ERM candidates pause before taking plunge

Date: 21/12/1995

By Tim Jones

THE Finnish markka looks to be the prime candidate for membership of the Exchange Rate Mechanism in the New Year, but even it will not enter the grid before the spring, according to top officials.

With the Swedish krona likely to join either at the same time or even later, the Italian lira waiting for political stability in Rome and the UK pound held outside by political necessity, the ERM is likely to remain a nine-member club for the first few months of 1996.

The key to this is a lax interpretation of the Maastricht Treaty, which specifies that any country wanting to be considered for monetary union membership in early 1998 must have been in the ERM for at least two years.

Sweden's Finance Minister Göran Persson disputes this - and most member states seem ready to accept his view. “Everyone is ready to be flexible although, in general, the Germans and Dutch are more rule-driven,” said a senior monetary official.

Finland's Finance Minister Iiro Viinanen is, however, unwilling to take the risk and wants to bring the markka into the ERM as soon as possible.

First he must wait for parliament to pass an enabling law, which is unlikely before spring.