One currency, no countries?

IT SEEMS ever likelier that in 1997 France and Germany will breach the Maastricht treaty’s ceiling on “excessive” budget deficits of 3% of GDP. This year is the crucial one for judging which countries should join the euro, which is due to arrive on January 1st 1999. So what if Germany and France both fail?

Go ahead without them? Four countries were already below the deficit ceiling in 1996: Luxembourg, the Netherlands, Ireland and Finland. Others may soon be. But it would be unthinkable to launch the euro without Europe’s anchor currency, the D-mark; and hard, though perhaps not quite inconceivable, to do so without France.

So how about including Germany and France (and, no doubt, Italy too)—even with deficits above 3%? The Maastricht treaty is quite elastic. A qualified majority of EU states will decide, it says, “after an overall assessment” whether a country’s deficit is too big. The definition of that 3% ceiling is hedged about, allowing small breaches if the deficit has “declined substantially and continuously” or if it is “exceptional and temporary”. Forecasts for 1998 might also be allowed to count. This second option is still, just, the likeliest.

But what about Helmut Kohl’s recent public promise that “three point zero”—no more—must be Germany’s ceiling? And didn’t the Amsterdam summiteers last month accept that euro-joiners should be chosen on the basis of 1997 figures, not forecasts? Unless Mr Kohl eats his words, a third option may thus come into view: postponement. A lot of German politicians and bankers, and most of the German public, want it.

This week, Jean-Claude Juncker, who, as Luxembourg’s prime minister, has just taken over the EU’s presidency for six months, said that, though he is against it, a delay is “legally permissible”. He cited a passage in the Maastricht document: “If by the end of 1997 the date for the beginning of the third stage [ie, the launch of the euro] has not been set, the third stage shall start on January 1st 1999.” In its context, this clearly refers to the possibility of an early euro-launch, not a delay; so most EU lawyers say the text does not allow for pushing the date beyond January 1999. For that, national governments would have to ratify a further treaty revision.

But a fourth, even twistier, option may emerge: to start the euro on time, but with no members for its first year. Under the treaty, applicants will be chosen next spring at a summit, by qualified majority vote of all existing members of the Union. Grounds could, no doubt, be found for rejecting the whole lot—even Luxembourg, which most indubitably passes Maastricht’s very strictest interpretation. It would be even more awkward if the euro’s birth broke Europe’s sole currency union, that between Belgium and Luxembourg.

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