Kohl's `counter-offensive' posted through back door

The subject? Easy: qualifying for the single currency under the Maastricht criteria

The subject? Easy: qualifying for the single currency under the Maastricht criteria. And the author? Easy: some fiscally irresponsible southern European? An Italian perhaps? A socialist?

Wrong. But I must confess to cheating. In drawing attention to the undesirability of making a fetish of "3 per cent", the leaders of Germany's Christian Democracy on Tuesday were actually hoping to emphasise convergence as a criterion for participation in the single currency rather than some numerical abstraction.

But the point is made by them in a way that would have been inconceivable last year. Then the deficit ceiling was absolute: now meeting the target is "crucial", but not the only consideration. The statement, an appeal to Germany to embrace the single currency, was made by three key figures of Chancellor Helmut Kohl's ruling CD party, Mr Wolfgang Schauble, leader of the parliamentary group and heir apparent to Dr Kohl, Mr Karl Lamers, the party's foreign affairs spokesman, and Mr Michael Glos, leader of the affiliated Bavarian CSU. They spoke with the authority of Dr Kohl.

It has not been a bad week for the euro in Germany. There are clear signs of an upturn in the economy and Bonn was told by Eurostat that it need not count the debts of former East German hospitals as part of its deficit, thus shaving 0.3 of a percentage point off its deficit.

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The challenge now is to make what Dr Kohl believes to be an economic reality into a political imperative, to break the pessimism of sections of the German political class. Targeted at a German readership, the statement makes interesting, almost uncomfortable reading. Germany must not abandon the euro because it is its own project.

The paper argues that the euro represents Europe's acceptance of the German social market model of the economy. That concept combines "a liberal, functioning economic order with a social order based on social justice and solidarity. It is also characterised by competition, an independent central bank to watch over prices, as well as consensus and social dialogue."

Germany, the paper argues, has persuaded France and Italy to pursue fiscal responsibility. Their transformation is truly "revolutionary". "The result of the stabilisation and convergence process is better than expected: the [European] Union is now a union of stability . . . Fears of a weak euro, widely held only because the spectre has been repeatedly raised, are not justified. Everything points to a euro whose internal value will be stable."

Even Italy is complimented for having made "remarkable progress in consolidating its public finances since 1992". And France has kept its inflation below German levels for almost five years. Spain will make the 3 per cent target and has "got to grips" with its inflexible labour markets.

The paper goes on to accept the once-heretical view that the process must also lead to greater co-ordination of economic policy. "The existing instruments of co-ordination . . . will have to be used more, and if necessary developed. Such a common political and economic line among participants in the euro, complementing the monetary strategy of the European Central Bank, is indispensable to the long-term success of economic and monetary union."

Germany has given the lead, and the message is that Germany must continue to lead. It has a "flagship function" and a "special responsibility for the completion of monetary union". The euro would not "be a question of sacrificing the D-mark on the altar of Europe, but investing it in the European cause".

Le Monde described the statement as "Kohl's counter-offensive" and good news "for all those EU member-states which feared that their efforts would be scuppered at the final hurdle on the rock of German dogmatism".

Domestically the Kohl government has been under fire from right and left. Mr Edmund Stoiber, the conservative CSU prime minister of Bavaria, has done a double act with elements of the Social Democrats, the most recent example being Mr Henning Voscherau of Hamburg. The latter has made EMU a central plank of his programme in this Sunday's local election, arguing that the EU needs to be democratised before the single currency proceeds.

The economic crisis is biting deep and German workers are hurting. The Maastricht disciplines are an easy scapegoat, and pressure on the Kohl government has been compounded by blunders, such as the infamous gold revaluation suggestion.

The result has been concern in the rest of Europe that Dr Kohl may not be able to hold the line. His retreat at the Amsterdam summit on the extension of majority voting shocked his partners.

And last weekend's demand by the Finance Minister, Mr Theo Waigel, for a massive German rebate on its net EU budget contributions post-1999 has not only raised problems for the poorer cohesion countries but prompted suggestions that Bonn is lukewarm on the great enlargement project.

But on Tuesday, by proxy, Dr Kohl reasserted himself as the driving force of European integration, reinforcing the single currency message of finance ministers in Mondorf-les-Bains at the weekend and of President Chirac on Wednesday: there is no turning back.

Patrick Smyth

Patrick Smyth

Patrick Smyth is former Europe editor of The Irish Times