THE president of the European Monetary Institute (EMI), Mr Alexandre Lamfalussy, has warned that nations hoping to participate in monetary union should not expect too much lee-way in meeting tough membership criteria.

Speaching in Lisbon at the 150th anniversary of Banco del Portugal, the head of what will be come the European central bank, said the road to monetary union could be difficult and the project cannot be jeopardised by under-serving members.

"Deviation from the reference values should be granted sparingly by interpreting the words of the treaty in a carefully restrictive way, Mr Lamfalussy said.

The Maastricht Treaty governing European Economic and Monetary Union (EMU) membership lays down strict economic targets for those hoping to join the currency project but also leaves room for some deviation on key criteria. According to the treaty, nations wishing to join EMU should have a deficit level no higher than 3 per cent of gross domestic product and a debt ceiling of 60 per cent.

The EMI president said European nations, most of which do, not now qualify for monetary union, are making a determined effort to reduce deficits, but major efforts are still needed.

"It is fair to say that it may now be possible to detect a fiscal turn around in most member states," Mr Lamfalussy said. But he stressed that in the EU, the government debt ratio will reach an anticipated 73.5 per cent in 1996, up from 56.1 per cent in 1991. "It as yet shows little sign of levelling off, let alone a reversal," Mr Lamfalussy said.

Mr Lamfalussy said the EMI council believes a currency should belong to the Exchange Rate Mechanism prior to joining monetary union.