EU Finance Ministers yesterday took another significant step towards the creation of the single currency with broad political agreement to one of the key pillars of a post EMU Stability Pact.
Ministers meeting in Luxembourg endorsed the principle that there would be a presumption of a financial penalty for those in the single currency who broke the excessive deficit limit of three per cent on a persisting basis.
Ministers also backed proposals that the single currency "ins" should aim to set their post EMU budget deficit targets at "close to balance".
They agreed that supervision and enforcement of such targets would best be achieved by the speeding up and reinforcement of current excessive deficit procedures in the treaty.
Yesterday, the ministers set the deficit procedure in train for Germany whose deficit last year slipped up to 3.5 per cent, but gave Denmark a clean bill of health. The latter now joins Ireland and Luxembourg as the only countries seen to be in compliance with the convergence criteria.
The Stability Pact proposal, still to be fleshed out in detail, will form key elements of a final package for the Dublin December summit on the central EMU questions of a Stability Pact for the "ins" and of a structure for a new Exchange Rate Mechanism to define the relationship between the "ins" and the "outs".
Yesterday, the Minister for Finance, Mr Quinn, said he was confident that substantial progress could be made under the Irish presidency but admitted the logistical problems of dealing with issues of such complexity were enormous.
Mr Quinn will have taken some pleasure, however, from the reference during the meeting by the German Finance Minister, Mr Then Waigel, to the "wonderful economic management of the Irish economy" praise indeed from a conservative Bavarian politician.
More significantly, the comment reflects a sign that the widely reported German fears only a year ago, that Ireland's economy was weaker than its figures suggested appear to been substantially dispelled.
An economic report on Ireland from the Commission due to be published today is expected to reinforce that view. It is understood to praise the Irish economy as "one of the best performers" in Europe and to predict that the performance "augurs well for continued growth and prosperity within the monetary union now on the horizon."
Mr Waigel will not have been completely satisfied with yesterday's debate on EMU. Germany had been proposing mandatory fines for breaches of deficit limits and a target of balanced budgets for the post EMU "ins".
But the member states have gone a long way, officials believe, to meeting German fears of in discipline within the system.
And Mr Waigel crossed swords with the British Chancellor, Mr Kenneth Clarke, over whether the treaty required that those who join the single currency will have been members of the ERM for two years. Mr Waigel and a majority of member state say yes. Mr Clarke, the Swedes, and the Finns say no.
The ministers yesterday agreed to fudge the issue by not making reference to it in their EMU progress report to the Florence summit on June 21st and 22nd.
Mr Clarke wielded his beef veto on two occasions, the first on an issue which, he confessed, was a move strongly supported by the British a proposal to allow EU fraud inspectors to make spot checks in the member states.
The other veto was cast on a proposal to set lending limits for the European Investment Bank for Latin America.
Minister were, however able to give informal approval to the nomination of the head of the Dutch Central Bank, Mr Wim Duisenberg, to head the European Monetary Institute in December when Mr Alexandre Lamfalussy retires.
