EUROPEAN economic and monetary union is "more than ever in the balance" because the stability pact agreed at last week's Amsterdam summit "lacks teeth", Mr Reimut Jochimsen, a senior member of the Bundesbank's governing central council, warned yesterday.
In a scathing review of progress towards the single currency, Mr Jochimsen said the "ragbag" of decisions agreed at Amsterdam did nothing to correct the "lopsided construction" of EMU.
His comments come after Thursday's admission by France's left wing government that it would be unable to reduce its public deficit to 3 per cent of gross domestic product this year, in line with EMU membership conditions set out in the 1992 Maastricht treaty. Although France stressed its commitment to launching the single currency in 1999, its failure to meet the target is likely to accentuate fears of a rift between Paris and Bonn.
And last night reports from Paris were that the latest government forecasts predicted that the budget deficit could be some 3.4 per cent of national output. A French government source was quoted as saying that it would be "extremely difficult to reach 3 per cent in 1997".
But despite this problem, France is going to "do everything within its power" to take part in economic and monetary union at the start of 1999 the source said. "The main thing is to do no worse than the neighbour", meaning Germany, which has also had serious public deficit problems.
Mr Jochimsen yesterday warned that EMU's "inadequate economic and political foundations" and unresolved economic policy differences between Germany and France "may lead to the disaster of political disintegration" in Europe.
The German inspired stability pact is designed to enforce budgetary discipline for countries in the future single currency zone.
Mr Jochimsen, who is president of the regional central bank of North Rhine Westphalia, Germany's most populous state, has made no secret of his doubts about EMU. But his remarks yesterday at Bonn University's Centre for Research on European Integration were unusually forthright and sensitivity timed.
In Germany, the Chancellor, Mr Helmut Kohl, has appeared in recent weeks to accord EMU greater political than economic importance as doubts have grown over Germany's ability to meet the treaty terms.
Mr Kohl has also been challenged by Mr Edmund Stoiber, the prime minister of Bavaria, to give a commitment that Germany will interpret the Maastricht deficit rule strictly as meaning 3.0 per cent of GDP.
Yesterday, Mr Kohl made a strong declaration in the Bundestag, the lower house of parliament, that he was "certain" the euro would be introduced on schedule on January 1st 1999 as a stable currency in full compliance with the Maastricht treaty criteria.
But Mr Jochimsen warned that in Germany's case "it is becoming ever more apparent that it will be difficult to meet the budget deficit criteria". The choice of countries for EMU in spring 1998 was "at risk of becoming increasingly political in nature", he said. "The last thing we should do is to create the impression that the common currency is going to be pushed through at any price, by hook or by crook."
Last night Mr Stoiber restated his commitment to a strict interpretation of the entry criteria for European economic and monetary union (EMU) and said a delay to the project would not lead to chaos.
Mr Stoiber, who has warned in a flurry of interviews over the past few days against any leniency when it comes to choosing the candidates for EMU, said the budget deficit ceiling for members must be 3.0 per cent of gross domestic product.
Asked what would happen if the EMU start date of January 1st, 1999, were to be postponed, Stoiber said: "It certainly won't lead to the chaos people claim. The aim won't be abandoned. We'll come to a new agreement and a temporary solution." His comments contrasted sharply with remarks by Mr Kohl's remarks.
