PUBLICATION today of official forecasts predicting a slowdown in, economic growth and a rise in unemployment will intensify the debate in Germany about the future of the European Monetary Union, writes Den is Staunton from Berlin.
The government report will show the economy set to grow at only 1.5 per cent this year, with unemployment reaching 10 per cent and the government deficit amounting to 3.5 per cent of GDP.
The economic convergence criteria agreed at Maastricht for membership of EMU demand that government deficits must be below 3 per cent, a target Germany looks increasingly unlikely to meet. Government ministers insist publicly that there can be no postponement of the 1999 deadline for the introduction of the single currency and that the convergence criteria must not be weakened. But some officials predict privately that the terms of Maastricht will have to be interpreted liberally if the entire EMU project is not to be derailed.
The Chancellor, Dr Kohl, warned party colleagues in the Christian Democratic Union and the Christian Social Union at the weekend that postponing the single currency would encourage member states to relax efforts to bring public finances into line. Most German politicians agree, refusing to discuss a possible postponement for fear of setting off a new round of currency speculation.
Germany is reluctant to take the lead in calling for a weakening of the convergence criteria, especially in view of the Finance Minister's repeated insistence that the conditions should be made stricter if anything. Popular resistance to abandoning the mark in favour of the euro means that German politicians must be able to convince the public that the new currency will be just as stable as the old.