Germany `to meet EMU criteria'

GERMANY will meet the criteria for joining the single currency next year, Dr Jurgen Stark, State Secretary at Germany's Ministry of Finance said in Dublin yesterday.

Speaking at the German-Irish Chamber of Commerce lunch, Dr Stark said Germany would meet the deficit criteria to enrol in EMU in 1997. He added that only three countries, Luxembourg, Denmark and Ireland satisfied the crucial budget deficit criterion already. "That was not the intention of the founders in Maastricht," he quipped.

He pointed the finger at "unfair tax competition" in Europe as one reason for Germany's failure.

Speaking after the lunch, Dr Stark said the informal Ecofin meeting earlier this week had agreed to set up a group to examine more closely the issues around tax competition. "Germany faces an erosion of its tax base," he said.

And one reason was that there were big companies in Germany operating Europe-wide without paying taxes in Germany. Unfair tax competition was attracting capital by specific regulation and to specific regions, he said.

Setting out the German agenda he warned that failure to "grasp the opportunity" presented by EMU could set Europe back by decades. "This is the time to strengthen the union and make it irreversible," he said.

He stressed the need to complement monetary union with the building of common foreign and security policies.

Outlining Germany's fiscal policy objectives, Dr Stark said priority would be given to the private sector.

The German government is planning to reduce spending to GDP ratio from above 50 per cent to its pre-unification level of 46 per cent.

"This will create the necessary conditions for lower taxes, lower contributions to the social security system and smaller fiscal deficits.