Italy's lone play for delay on euro falls on stony ground

With its prospects of qualifying for the single European currency on time fading fast, the Italian government yesterday floated the idea of delaying monetary union by one year to give everyone more time to meet the strict criteria laid out in the Maastricht treaty. The suggestion, however, fell flat almost as soon as it had been made.

As Europe's foreign ministers gathered in Rome to celebrate the 40th anniversary of the founding of the European community, Italy's representative, Lamberto Dini, proposed the delay in an interview with his country's leading financial daily, Il Sole-24 Ore. "I am convinced that one more year would be useful for everyone," he said.

The measures being taken to meet the Maastricht criteria, he said, were slowing down Europe's economies. Even France and Germany were having difficulty meeting the criteria; delay would not only give them more time, he argued, but would avoid anguished debates about budget austerity and the abandonment of the mark when Germany holds its next general elections in October 1998, three months before the euro's launch date.

Mr Dini's remarks were quickly scotched both by the Germans and the French. "If we want to change the rules we have to renegotiate the Maastricht treaty. As long as we have this treaty we have to abide by it," said France's Foreign Minister, Herve de Charette.

Faced with this rebuff, Mr Dinibacktracked. "I haven't requested a delay in monetary union," he insisted. "I was just repeating something I've been saying for some time."

Mr Dini made a similar proposal in Majorca in September 1995, when he was Italy's prime minister, and received an equally chilly reception. The problem for Italy, then and now, is that qualification for monetary union is a supreme political goal which no government could miss and hope to survive.

Mr Dini's government, and the present centre-left coalition led by Romano Prodi, have made gargantuan efforts to rein in Italy's runaway public finances. It is still conceivable - just - that Italy could meet the main Maastricht criteria, a deficit-to-GDP (gross domestic product) ratio of 3 per cent, by the end of this year. But the rest of the European Union, particularly Germany, has grown more nervous in the face of Italy's efforts because it has no faith in the country's archaic economic structure and Byzantine, inefficient institutions.

Italian diplomats realise that their only chance of joining the euro on time is if the whole process is delayed, and they have been lobbying hard behind the scenes on this platform for several weeks. Italy's problem, though, is a lack of allies in the EU. Spain views Italy as a competitor, not as a collaborator, while Greece and Portugal are too far off target to even hope to qualify for monetary union.

Italy's next best option would be a late entry - some time after 1999 but before 2002, when the final phase of Emu is due to be completed. It is not an option the government is keen to contemplate because it is fraught with political unknowns. One big risk is that Mr Prodi's government would fall and plunge the country into yet another crisis. Or that the affluent north - goaded by the separatist Northern League - could push to be admitted to the euro club and leave the rest of the country behind.