The future of Europe's planned Economic and Monetary Union (EMU) suddenly appears less certain after the very public conflict between the German government and its own central bank, the Bundesbank. The bank has rejected the government's plan to revalue prematurely the country's gold; reserves in order to smooth the path for EMU entry. Yesterday, the German finance minister, Mr Theo Waigel, still appeared intent on bringing forward the revaluation and transferring part of the gain to the government's coffers, a move designed to ensure that Germany will meet the Maastricht criteria.
The markets, to no one's surprise, are quite unimpressed by these manoeuvres. The EMU project is supposed to be built on sturdy foundations but there is, clearly, an element of the `three card trick' or creative accounting about Mr Waigel's revaluation ploy. A similar ruse, in which the resources of a privatised Deutsche Telekom would be sold off, to help meet the criteria, similarly does little to inspire market or public confidence. The French government has also embarked on creative accounting practices in order to meet the convergence criteria with its plan to use a pension related payment from France Telecom to reduce its current budget deficit.
There is a great irony at work here; both Paris and Bonn are clearly prepared to concoct all sorts of artificial schemes in order to meet the criteria; but there is a clear risk that such actions will weaken the credibility of the single currency and undermine efforts to mobilise public support for the project.
All of this is evidence of how political priorities have become skewed in the run up to the proposed monetary union in January 1999. Political attention has become focused on the short term task of meeting the entry criteria instead of concentrating on the real challenge of how to build a durable EMU model that will deliver currency stability, low inflation and low interest rates in the longer term.
It is to be hoped that the current difficulties surrounding the EMU project will help to concentrate the minds of policy makers in this State who even now appear determined to sleepwalk their way into monetary union. This election campaign has been notable for the paucity of real debate on the EMU or on the potential difficulties that might need to be overcome before it becomes a reality.
Yesterday's address on EMU by the Governor of the Central Bank, Mr Maurice O'Connell in which he signalled that monetary union on schedule in 1999 was not entirely certain should also serve as a useful wakeup call for any incoming government. It also underlines the need for the greatest level of preparation in Ireland for EMU. The incoming Government cannot simply rest secure on the assumption that Ireland is on course to join the single currency; we must also be clear on the kind of policies that will bolster our competitiveness and ensure continued growth inside the monetary union.