Only a few months ago the European Commission's eternal optimism about the single currency project was the subject of some derision in the press room of its headquarters and in the capitals around Europe. Many of the euro's most fervent supporters were suggesting that maybe they had mistimed the European economic cycle and that they should have given themselves another year before the launch. Three years ago, as the Commissioner for Economic Affairs, Mr Yves Thibault de Silguy, confessed repeatedly yesterday, "who would have believed we would be in the position we are in today?" The answer to that rhetorical question, of course is "Mr de Silguy", who had repeatedly assured us then that it would all be all right on the night. Yesterday it was like he, too, was having difficulty believing the Commission's autumn economic forecasts, pinching himself to see if he was awake.
The truth is, of course, that the beginnings of a European-wide economic upswing have saved the euro's bacon, and Mr de Silguy's, even boosting actual growth figures by 0.2 per cent beyond the Commission's optimistic spring forecasts. Industrial production rose in July on an annualised basis by 4.5 per cent, a trend expected to continue with good external demand stimulated by world growth figures of the same size.
With EU GDP growth now expected to pick up to 2.6 per cent this year, 3 next year, and 3.1 in 1999, the challenge of meeting the most difficult of the Maastricht targets, that of the 3 per cent deficit, has become far easier. Only the UK and Luxembourg show signs of growth slowing.
Even Italy is poised to do it this year and will, if its current political difficulties are genuinely over, hit 2.7 per cent if the budget is implemented in full for 1998.
Italy's effort to be part of the first group is "realistic, but not yet realised", Mr de Silguy said yesterday, but the tone of celebration here suggested all think it will be realised.
Mr de Silguy was yesterday reiterating that the decision on who participates will still not be made until May and then on actual out-turn figures. The Commission, he said, would in its recommendations to the heads of government have to determine "a high degree of sustainable convergence" which would involve not only looking at the results for 1997 but budget plans for 1998.
The significance of yesterday's figures is precisely that they show remarkable, sustained convergence for both 1997 and 1998. Inflation should remain stable just above 2 per cent (highest, except for Greece, is the UK at 2.4 per cent) "and is expected to continue in 1998". Government debt is falling steadily everywhere except Germany where it is expected to rise slightly.
"Interest rates are sustainably low and the absence of exchange rate tensions among EU countries is reassuring," the Commission says. The average government deficit is expected to fall from 2.7 per cent to 2.2 per cent next year and 1.8 per cent in 1999, with only France among the candidates for initial membership of the euro this year expected to break 3 per cent, but only by 0.1 percentage point. Even Greece, definitely not in line for the first wave of membership, looks set to be ready to join by 1999.
The downside of the Commission projections is unemployment. Although some 3.8 million jobs are expected to be created between 1997 and 1999, unemployment is unlikely to fall below 9.7 per cent from 10.7 per cent this year unless member states make significant structural changes in their labour markets.
The lesson for Mr de Silguy is clear. European governments, he says, should use the same Maastricht "mobilising and dynamising" approach of target-setting to job creation that they have successfully used to prepare for the single currency. Hence the Commission's proposal to next month's jobs summit in Luxembourg for quantified guidelines for labour market reform.
