| For some time in this column, I have argued that European Monetary Union (emu) was unlikely to go ahead on schedule in 1999. There were two main reasons for my view. First, on the basis of the criteria set by the Maastricht Treaty, hardly any eu countries were likely to meet the convergence targets. Many would fail to meet either the budget deficit target of 3% of gdp by the end of 1997 or the debt-to-gdp target of 60%. Others would fail to meet the inflation and bond yield limits. The other reason was that if the criteria were relaxed or flexibly interpreted by the European Commission in order to allow emu to get up and running, that would never be accepted by the German public who wish to protect the value of their Deutschmark savings. A monetary union that included member states like Italy and Spain, which could not meet the Maastricht criteria in time, would produce a very weak euro compared with the Deutschmark. So Chancellor Kohl would be forced to postpone emu rather than face the wrath of German savers. But now it seems more likely than not that emu will go ahead on time in 1999. |