Tietmeyer weakens on EMU criteria

THE Bundesbank president, Dr Hans Tietmeyer, yesterday opened the door to flexible interpretation of the Maastricht conditions for the introduction of a single currency, which he said was now likely to occur in 1999.

In significant comments he said Italy would be welcomed into the group of countries using the new euro currency if it fulfilled the qualifying conditions "in a lasting way".

"It seems likely today that the timetable will be respected at least by a limited group of countries," he said.

"If nothing surprising happens between now and then monetary union will start at the beginning of 1999."

Speaking against a background of controversy about supposed window dressing of national accounts by France and Italy, he said that "Italy is making a considerable effort to solve its problems, and this is positive".

He also said that the deutschmark was now correctly valued and ruled out any increase of German interest rates in the near future, in an interview with the newspaper Le Monde.

Dr Tietmeyer, who until now has insisted on literal interpretation of deficit limits in the Manstricht Treaty, said the "general situation" of EU countries should be analysed when the time came to decide which countries qualified for economic and monetary union (EMU).

"It will then be possible to stand back somewhat and see what the general situation is, and not concentrate only on one figure or another in particular, but ask it behind the figures, it is then possible to say if it is likely the trend can be continued in a lasting way."

He said: "Alongside the criteria there are margins for interpretation which must be analysed very carefully, but it will be possible to take a decision on this only in the spring of 1998, when all, of the figures will be available."

Concerning so called flexible interpretation of the conditions, Dr Tietmeyer said: "Everything depends on what is meant by flexibility. On the one hand, the treaty lays down figures but on the other it provides margins for interpretation which, in the same way as the figures, must be read and respected in a strictway, as the German government and the Bundesbank both think."

There has been controversy recently about ways in which several members of the European Union (EU) intend to squeeze their public deficits, next year, the qualifying year for participation in use of the euro from January 1st, 1999.

The treaty gives the reference value for the public deficit as 3 per cent of gross domestic product (GDP), and for the national debt 60 per cent of GDP.

France is having difficulty in achieving the deficit target, and so, too, to a lesser extent, is, Germany, which might have a problem with the debt limit.

Italy is unlikely to meet the deficit limit until 1998 and its "debt amounts to about twice the limit.