The euro for everyone! Apart from Greece, irremediable
European Union, all the countries of the Union should be recognized as able to switch to the single currency in 1999, according to the Commission’s 1997 economic forecast, released yesterday. Thus, five countries of the Union are already qualified to switch to the single currency on 1 January 1999: France, Luxembourg, Denmark, Ireland and the Netherlands. And, if one believes the predictions enthusiastically announced by Yves-Thibault de Silguy, the Commissioner for Monetary Affairs, eight other countries should be admitted without difficulty to join the club when the decision to move to the Economic Union and Monetary Policy (EMU) will be taken by Heads of State and Government in April 1998. These are those who do not meet the public debt criterion (60% of GDP) but who are either scarcely distant (like Germany or Finland), or get close to it quickly (Portugal, Sweden, Belgium, etc.). Already, the Commission has officially recognized that the public debts of Denmark, Ireland, and the Netherlands were in a significant reduction. A flexibility provided for by the Maastricht Treaty and which has the logic for it, the reduction of the deficit announcing mechanically a reduction of the debt. Remains the case of Italy whose public deficit exceeds the sacrosanct 3% of about 0.3%. But the Commission explains that nothing is lost for the peninsula: “Treasury operations amounting to 0.3% of GDP were included in the calculation of the Italian deficit, but other measures (0.3% of GDP) are still under discussion. “In other words, Rome could be described as extremely accurate.
“Fiscal Consolidation” policies
And even if some countries are recalibrated at the beginning of 1998 (if the final figures for 1997 are not as good as expected), the Commission predicts that the “fiscal consolidation” policies will continue to bear fruit in 1998.
At worst, therefore, Latecomers should be able to qualify in early 1999, three months after the start of EMU. Except for Greece, of course.
Even if Yves-Thibault de Silguy admits that we must “show modesty in economic forecasts,” we can wonder if the Commission has not a little too forced on the rose, blinded by his desire to see the ‘EMU come true on time. Thus, many economists question the ability of France to meet the 3% deficit criterion in 1997 when it had already resorted to accounting artifices (the payment by France Telecom to the state budget of 37.5 billion to cover the future pensions of its employees representing 0.45% of GDP) … Same situation in Germany where the six major business institutes last week forecast that the deficit will reach 3.5% of GDP in 1997 and not 2.9% as hoped by the government and the Commission … And yet, these institutes have incorporated into their calculations the recent fiscal austerity measures announced in the Rhine. Yves-Thibault de Silguy simply felt that he was giving “more credit to the consolidation effort” in Bonn … Joining the skeptics, the European Monetary Institute (EMI, the embryo of the European Central Bank) judged yesterday that “the majority of EU countries have not yet reached a tolerable fiscal position in the medium term”. For the EMI, budget consolidation remains “generally too slow”.
And it is not the timid resumption of growth in 1997 announced by the Commission that will allow states to meet their Maastrichtian obligations: 2.3% (2.1% in France, 2.2% in Germany) against 1, 6% in 1996.