EMU target date not in danger says German minister

THE German Finance Minister, Mr Theo Waigel, yesterday gave an assurance that Germany would respect the conditions for the introduction of a single European currency in 1999, despite its latest budget upset, in a fighting speech to a special session of parliament.

He told the heated session that the newly estimated shortfalls in expected tax revenue for this year would not endanger Germany's qualification to participate in EMU from the outset, and outlined emergency measures to bring more money in.

Mr Waigel vowed once again that public deficits would not exceed the prescribed 3 per cent of gross domestic product. But he said privatisations would be speeded up. As well as sale of more of the state shares in telecommunications corporation Deutsche Telekom, he mentioned the former post office bank Postbank, railways corporation real estate and other holdings.

Nevertheless, the three opposition parties called for his resignation over the government's controversial plan to revalue the Bundesbank's gold and currency reserves.

But Mr Waigel assured an unusually raucous special session of parliament that the plan to realise a capital gain from the reserves to help smooth Germany's way towards European economic and monetary union (EMU) was not "creative accounting" but "acceptable and legitimate".

He said the operation would be carried out with "all due caution" to guarantee the financial solidity of the Bundesbank.

Ms Ingrid Mattaus Maier, the opposition Social Democrats' budget expert, told the packed chamber that Mr Waigel's disclosure on Thursday of a DM115 billion (£45.5 billion) shortfall in budgeted revenues between now and 2001, and his plan to draw on some of the DM60 billion of locked up value in the Bundesbank's gold, and currency reserves to reduce the public deficit and debt, had plunged Germany into "unprecedented financial chaos".

However, the Chancellor, Dr Helmut Kohl, strongly backed the finance minister, saying his European partners would support the move to raise money from the Bundesbank because they knew that "without Germany, the euro will not work".

European Commission officials in Brussels said the move should remove all doubt about Germany's commitment to meeting the EMU criteria. In Italy, where the struggle to meet the criteria has been intense, there was relief that Germany too bad been forced to acknowledge difficulties.

The funds would be paid by the Bundesbank in the form of an extraordinary profit into the "redemption fund for historic burdens". There they would offset other public deficits to ensure that Germany's overall deficit stayed below the limit set by the Maastricht treaty's criteria for EMU membership of 3 per cent of gross domestic product.