A co ordinated response across the EU to the current uncertainties about the Maastricht single currency timetable is needed now. The latest economic figures from France and Germany have raised fears that even the two states intended to be at the core of the currency may not meet the criteria set down in the Treaty. Ministers from different states are expressing varying views on the prospects of the deadline being met. Firm hands are needed on the tiller in what looks set to be a difficult year.
It is ironic that doubts about the single currency timetable are being raised just as the European Commission launches its campaign to persuade the public of the project's merits. The main concerns centre on the Maastricht rules which specify certain standards of budgetary performance for states wishing to qualify. Neither France nor Germany currently meets the requirement that the budget deficit be less than 3 per cent of national output; the concern is that striving to meet the target next year could further slow already sluggish economic growth.
It is too early to say how many states will meet the criteria by 1997, which, according to current plans, is the year when economic performance will count in determining qualification. Much will depend on the pace of economic growth moving into next year and whether lower interest rates can revive the pace of expansion. If lower borrowing costs do boost growth, then it will be all the easier to meet the budgetary criteria. A lapse into recession, however, while not expected on current trends, would make it all but impossible for enough states to meet the strictures.
Faced with these uncertainties, how should Europe's politicians and the EU Commission respond? Merely stating that EMU will go ahead on schedule will convince neither the public nor the financial markets. Europe's leaders need to show that they are facing the problems which are causing the uncertainty seriously and are putting forward a coherent case why they still believe the Maastricht timetable should be followed, if that is indeed their view. A thorough discussion by EU finance ministers, as sought by the Minister for Finance, Mr Quinn, would be a good start.
The main motivations for the move to EMU are political. Europe's politicians must persuade their voters that the project also makes good economic sense. They need to show that the single currency plan can be married to a strategy to boost living standards and tackle Europe's central economic problem of unemployment. At the moment the risk is that meeting the Maastricht criteria will actually cost jobs by imposing unreasonably tight budget requirements on states such as France.
Other important questions about the EMU plan remain unanswered. Will it be workable without deeper political union? How will the currency relationships between states inside the union and those outside be managed? What rules will operate once states enter EMU? And will there be any mechanisms to assist states hit by specific economic shocks? It is a challenging agenda for Europe's ministers to tackle in the months ahead, but one they must meet squarely if they want to keep the project on track.