ITALIAN Prime Minister Mr Romano Prodi yesterday angrily dismissed reports that Italy will be offered a delayed entry into the European Single Currency under a plan hatched by senior EU central bankers and monetary officials. A statement issued by the Prime Minister's office said.
"The Italian government deplores the constant repetition of false stories and unjustified statements, including from authoritative media, which have no foundation whatsoever... They only serve to generate uncertainty among Italians and on financial markets...
"Prime Minister Prodi reaffirms Italy's firm intention and solemn commitment to meet the convergence criteria envisaged under the Maastricht Treaty within the time foreseen."
Mounting speculation about a delayed Italian entry into European Monetary Union (EMU) crystallised in a report in yesterday's Financial Times which claimed that senior EU monetary officials add European bankers had hatched a face saving compromise" whereby Italy's entry would be delayed until 2000 or 2001 rather than at the outset on January 1st, 1999.
It is no secret that German public opinion and leading German bankers have grave reservations about the inclusion of the potentially volatile Italian currency in EMU from the outset. Speaking at the World Economic Forum in Davos, Switzerland, only last weekend, Mr Ulrich Cartellieri, a board member of Deutsche Bank AG, said:
"If Italy and certain other European countries are in, a time bomb is ticking within EMU. The fiscal success that the government in Rome has enjoyed recently cannot be maintained in the long run.
Many bankers and economists argue that if Italy (and/or Spain and/or Portugal) were included in the first wave of EMU countries, then Europe's new currency, the euro, would get off to a shaky start. In particular, the perceived unreliability of the lira could mean that the euro would be weak, leading to rising inflation and rising interest rates in Europe and prompting financial instability in world currency markets as well as a probable political row over the dollar euro exchange rate.
Although both the European Commission and the German government were yesterday quick to deny the existence of any plan to delay Italy's EMU entry, unidentified sources in Brussels told the Reuter news agency:
"I can't confirm to what extent this (plan) is something which has been completely worked out, but in some quarters people are definitely thinking about this."
According to the Financial Times, the "compromise" aspect of the plan would be that Italy's initial exclusion would help guarantee a strong and stable euro while its inclusion before the introduction of euro notes on January 1st, 2002 would make Italy feel "more or less in".
Diplomatic sources in Rome, however, were yesterday sceptical about the initial exclusion of Italy from EMU, pointing out not only that Mr Prodi had tied his political future to Italian inclusion from the outset but also that in the wake of tough government budgetary policies, aimed at bringing the Italian economy into line with the convergency criteria, the exclusion of Italy would have serious social and political repercussions in the country itself.
Mr Prodi, who heads a centre left coalition government, won last April's general election after a campaign in which he had made "entry into Europe" a major electoral pledge. In his first nine months in office, Mr Prodi has engineered the lira's readmittance to the Exchange Rate Mechanism while pushing a tough budget through parliament.
Furthermore, in an attempt to bring the Italian economy more into line with the EMU requirements, Mr Prodi and his Finance Minister, Mr Carlo Azeglio Ciampi, intend to introduce a mid year deficit trimming mini budget as well as bringing forward the timing of the 1998 Budget.
On Monday, the EU's statistical office, Eurostat, predicted that by the end of 1997 Italy's deficit GDP ratio, a key convergency criterion, would meet the 3 per cent Maastricht target, thus showing a significant improvement on the 1995 and 1996 figures of 7.4 per cent and 5.8 per cent respectively.
