Ever closer to euro-fudge
B R U S S E L S
ALTHOUGH France is one of the parents of Europes single currency, it seems bent on making the euros birth awkward. The (French) European commissioner for monetary matters, Yves-Thibault de Silguy, bravely welcomed the French governments new fiscal measures this week as going in the right direction and affirmed yet again that the euro was on track for launch on January 1st 1999. But even he could not hide the fact that the French government feels obliged to concede that its deficit in 1997 will breach the Maastricht ceiling of 3% of GDP for countries wishing to join the euro club.
Dominique Strauss-Kahn, the French finance minister, has not, of course, so starkly drawn attention to the hole in the roof. But his measures are intended to leave the French deficit somewhere around 3.2% or 3.3%, with no guarantee that it will shrink in 1998. Mr Strauss-Kahn claims, even so, that France will be at least as eligible to join the euro as its partners.
The treatys criteria are defined flexibly enough to let countries join with a deficit of more than 3%. Mr Strauss-Kahn has also taken to talking down the deficit criterion, arguing that it is a flow covering one year only. What matters most, he says, should be the stock of debt, which reflects past fiscal history. The debt is supposed under Maastricht to be below 60% of GDP; or, if above this ceiling, it is meant to be on a clear downward path.
Theo Waigel, Germanys finance minister, disagrees entirely. He insists that the deficit ceiling is sacrosanct at 3% and not a pfennig more; and he plays down the debt criterion on the ground that Germany had to shoulder enormous debts to pay for unification. It is not coincidental that France safely meets the debt target, but Germany does not.
The real subject of this arcane debate is Italy. If the euro is to arrive at all, nobody seriously questions that both Germany and France will be there. But, though France also wants Italy in, Germany remains fiercely opposed. Yet, if France gets in with a deficit of 3.3%, it will be well-nigh impossible to keep out Italy, which will have a deficit in the same range or perhaps even less. Not only would this dismay many Germans; it would also raise serious doubts about the effectiveness of Germanys much-loved stability pact, which is meant to keep all euro members borrowing perpetually below 3% of GDPon pain of heavy fines.
There is an irony in Germanys insistence both on 3.0% (three point zero, in the sturdy words of Helmut Kohl) and on keeping Italy out. It reflects a determination that the euro must be as strong as the D-mark. Yet, faced with apparently fudged criteria and the inclusion of Italy, the European Central Bank might then choose to follow a tighter monetary policy, making the new currency harder, not softer. Besides, which of the worlds major currencies over the past 12 months has been the weakest? Strange to relate: the D-mark.
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