Bundesbank officials welcome EU summit pact

A CHORUS of Bundesbank officials yesterday welcomed approval of the stability pact at the Amsterdam European Union (EU) summit, saying it would help ensure essential budget discipline after monetary union.

Three central bank council members said it was important the pact had not been softened to accommodate French demands for a greater emphasis on job creation in EU policy and that no additional EU funds would be made available to combat unemployment.

"It shows that all sides are willing to compromise Bundesbank council member, Mr Ernst Weltcke said. EU leaders in Amsterdam on Monday approved the pact together with a resolution on boosting employment and growth, included at French insistence.

France's new Socialist-led government last week raised doubts the pact would be ratified by saying it wanted more time to consider it.

Bundesbank council member, Mr Guntram Palm said the main threat to the single currency's success did not lie in the extent of nations' budget deficits or public debt in 1997 but in the possibility that some participants may lack fiscal discipline after its launch in 1999.

That was why the stability pact to ensure budget discipline after European economic and monetary union (EMU) was so important, Mr Palm said in a speech.

Mr Palm added that a budget deficit of 3.2 per cent or 3.3 per cent of gross domestic product (GDP), exceeding the reference level of three per cent stated in the Maastricht Treaty, would not automatically prevent Germany from qualifying for EMU.

He said Germany would meet the convergence criteria without using budget tricks. Instead, it would use the leeway granted in the Treaty.

Mr Hans-Jurgen Krupp. another member of the Bundesbank's council, called the agreement reached in Amsterdam "very sensible".

He described the stability pact as "mainly an instrument to further appease the German side".

"The agreement is not so surprising. It is a sign of European prudence," Mr Krupp said.

The stability pact, brainchild of German Finance Minister, Mr Theo Waigel, is seen as crucial to overcome German concerns that the curo would not be as stable as the deutschmark.