THE Germans have an expression for it, "preaching water, but drinking wine". Bonn's once financially teetotal Finance Minister, Mr Theo Waigel, has, it appears, strayed from the straight and narrow.

It's been a rough week for the euro, with much talk, once again, of postponement or of a currency much weakened by creative accounting.

Only a matter of a month ago Europe's papers were praising the leadership of Germany's Chancellor, Dr Helmut Kohl, for announcing his, decision to run again and that of France's President Jacques Chirac for his decision to allow a clear run at the euro next year by bringing forward the general election.

But they are both mere mortals. Whatever the result of the French election, it quickly became clear there was going to be an injection of a note of wobble into the French government's position on the euro.

The Damascene conversion of the Eurosceptic Mr Philippe Seguin to the European cause to become the right's potential prime minister in Mr Alain Juppe's place is not entirely credible.

And the Socialists Mr Lionel Jospin made clear that he intended to attach new conditions to French participation membership of the currency from the start by Spain and Italy and the creation of a new economic council within the Union to prioritise jobs.

But although the road ahead may be bumpy few doubt their real commitment to getting the euro off the mark on time although finding it more difficult, should circumstances require it, to propose new budget cuts.

YESTERDAY, the Bundesbank was doing its best to reassure us that it too was not in favour of postponement of the launch of the euro and simply wanted to raise "a few problems" about the effect of Mr Waigel's revaluation of its gold reserves, particularly of the requirement for it to make a profits payment in 1997 - the suggestion is clearly that a deal can be done, although whether in terms that will met the government's need for a 1997 quick fix on its deficit is unclear.

It now appears that Mr Hans Tietmeyer, the bank's formidable president, who last week also stressed he had no intention of resigning, wants to confine the damage done by the row to the domestic political arena. And there, no doubt about it, he can do much damage.

The European Commission is being extremely coy about its likely verdict on the revaluation exercise from a national accounting point of view. Although the Commissioner for Economic Affairs, Mr Yves Thibault de Silguy, has said he still believes that the Germans will make the single currency, he was saying that before the announcement of the revaluation of the gold.

The Commission has been badly burned by suggestions that the decisions of Eurostat on whether certain payments can be used for deficit rather than debt reduction purposes can be influenced by political considerations.

Eurostat's track record, and its publicly stated philosophy suggest, however, that Mr Waigel has no reason to fear that his gamble will fail at the Brussels fence.

The only precedent is an attempt by the Belgians to sell gold from the national reserves to reduce their deficit - they were told that the move was only allowable as a debt reduction measure. But the use of a profit, albeit a paper profit, on an undervalued asset for deficit reduction purposes is seen here as quite different.

"I don't really see any reason why the German revaluation could not be included," Dr Terry Baker of the ESRI says.

There is a strong feeling in Brussels that the die is cast and that the single currency will still go ahead on time. Too much is now at stake economically and politically to retreat. Indeed Germany's problems now could pale into insignificance if postponement brought the expected flood of money into the DM, making exports prohibitively uncompetitive.

IRELAND'S former commissioner, Mr Peter Sutherland, probably echoing Dr Kohl, argues that although the revaluation and the French election have combined to produce an "increased risk of wobble", the whole European project is at stake if the Union backs off now. Its political masters will not do so.

And he bemoans the fact that the German debate seems to be missing a discussion of the key precondition for the viability of the euro - the currency will be respected, he argues, if it is based on genuine convergence of economies. And the evidence is there of very real convergence, not only of deficits (see table) but of inflation, and interest rates. The German "staggering maladroitness" in handling the gold row, makes no difference to that central fact.

On the basis of a scenario that the euro will go ahead on time, the real questions then are about what the fallout will be in Germany, whether" the rules of the game when it comes to choosing initial euro participants, are changed, and, hence, whether the markets will see the euro as a weaker currency and punish it with higher interest rates?

To deal with the latter, related issues first although there is much glee in Italy that the Germans may have undermined their ability to argue convincingly for a strict observance of the 3 per cent deficit criteria, such rejoicing is almost certainly misplaced.

The recommendation from the European Monetary Institute on which member states qualify for initial membership early next year will not be based simply on a one off snapshot of a state's deficit in 1997 but on the sustainability of its reduction. And, as the Commission's spring economic forecasts make clear (see table), Italy's special measures make their likely 1997 success unrepeatable without dramatic new cuts.

Germany's one off gold revaluation, however, is an entirely different story. Bonn is already projected to have a deficit of 2.7 per cent in 1998. Portugal and Spain are also both able to pass the sustainability test. The challenge now, it appears, is to find a formula to exclude Italy initially, thus reassuring the German public, while preventing a collapse of the lira by giving Rome an assurance that they will be allowed in within a year.

Such a course would also reassure the markets which have seen some movement away from the eurozone currencies into Swiss francs, but there can be little doubt that the events of the last week may have a lasting long term price in terms of interest rates.

AND, as for Germany's internal politics - the government has said that it intends to, and can, force through the Bundestag the necessary legal changes. Dr Kohl has once before taken on the Bundesbank and won, despite the public's almost religious attachment to its independence - over the unification of the country and the Chancellor's determination to exchange eastern and western marks on a one for one basis.

How this row develops will depend largely on what Mr Tietmeyer says when he gives evidence to Parliament on Thursday and whether, bank and, government can reach a compromise.

But the damage to the credibility of the government is done, and Mr Waigel's future must still be in doubt. Although the SPD's Mr Oscar Lafontaine is still performing a poorly in the polls, his demagogic rival Mr Gerhard Shroeder is 20 points ahead of Dr Kohl and is likely to assume the SPD mantle this autumn for the elections next year.

Although polling will take place after the decision on who will participate in the euro, and the SPD is certain to insist on Mr Shroeder's commitment to the euro, the mismanagement of the gold issue and perceived attack on the independence of the bank will certainly play heavily in the run up to the election.

Europe may get its euro, but the price could be the loss of its greatest proponent, Dr Helmut Kohl.