Don't misjudge Europe's real mood

It may suit British sceptics to believe EMU is now an irrelevance - but it isn't true, warns Leon Brittan

A wave of wishful thinking, selective reporting and premature gloating is distorting Britain's perception of the European monetary union project just when we most need to keep our wits about us. Britain must decide at some time in the next few years whether it suits our interests to join a single currency or not.

It is on the pros and cons of joining that Britain's industrialists, politicians and ordinary citizens should be concentrating their thinking. Instead, we are effectively being told that we do not need to think about it any more for the deadline and the terms are unravelling, just as the British always said they would.

It is consoling to be told that you do not need to answer a difficult question, but it can be dangerous to duck out of it that way. Sound policy- making requires a much less self-serving view of what is really happening in Europe today.

The wishful thinkers argue that the voyage towards monetary union is finally hitting the rocks of economic reality as key Germans, French and other Euro-enthusiasts are voicing doubts about the timetable and, indeed, the very project itself. They gleefully point out that even the grand architects, former French President Valery Giscard d'Estaing and former Commission President Jacques Delors among them, are starting to admit the folly of their construction.

But hang on. Only yesterday Mr Delors said just the opposite: "Solemnly I say that any delay in applying the treaty [on EMU] would be a catastrophe, for European integration as well as for the management of currencies ... to want to soften the criteria is counter-productive." And only two days ago, Giscard reiterated his determination to see the 1999 deadline respected.

Across the Rhine, Gunther Rexrodt, Germany's economy minister, said: "I am firmly convinced that we must adhere to the agreed plan with the start of EMU on 1 January 1999, and to the convergence crtieria as they were agreed in Maastricht." The French and German governments have officially echoed this view, as did most of the European Union's foreign ministers at their meeting on Monday.

According to ancient legend, the gods cursed Cassandra with the ability to predict future events but never to be believed. There is a tendency for the British to feel touched by the same curse when it comes to Europe, and never more so than now. The British have every right to their own views on the merits of the timetable of a single European currency. Indeed, the natural scepticism and pragmatism of the British are much-valued assets in the EU - they have helped see off unnecessary legislation in the past.

However, it is vital for Britain to read all the signals coming from the rest of Europe, not just those which fit the mood of the moment. The fact is that France, Germany and most other EU countries continue to be determined to start the single currency in 1999. As long as Chancellor Helmut Kohl heads Germany he will press on with this goal with rock-like determination. And he is a pretty formidable rock.

In France, what is significant is not that French plans to meet the convergence criteria led to strkes and demonstrations, but that the French government pursued those plans knowing perfectly well how unpopular they would be and has been continuing the same policy since the strikes finished.

None the less, it is reasonable to ask: even if the political will is still there, do the economic realities permit the goal to be reached on time? France and Germany have, for example, failed to bring their budget deficits under 3 per cent of GDP, as required by the Maastricht convergence criteria. But they do not have to do so until the end of 1997. The German budget deficit has hovered around the 3 per cent mark for several years, even falling below it in 1994. The faltering German economy has pushed the figures up a notch. But Germany has two years to shave off just 0.5 per cent, and has shown itself quite capable of taking the action necessary to make that possible.

For France it will be harder but by no means impossible. France has already cut its deficit from 6 per cent in 1994 to 5 per cent in 1995, and Prime Minister Alain Juppe's deficit reduction plan has managed to survive the massive wave of public-sector strikes, although the degree of schadenfraude felt in Britain at France's troubles has obscured this fact.

Britain cut its deficit by almost 3 per cent in two years, and there is no reason why France will not manage a further 2 per cent cut over the same period of time. Admittedly, the economic climate is not ideal. Both Germany and France have announced packages to boost jobs, growth and confidence, but the small print in these packages shows that slimming the deficit still takes precedence over all else.

The British wishful thinkers believe the pressure to delay the 1999 deadline is now too strong to bear and that something must give sooner or later. Some are publicly willing it to happen sooner, a tactic which is likely to be counter-productive and to have just the opposite effect in Germany and France, particularly if there is any suspicion of mischievous motives on Britain's part.

Opinion-poll gazers, too, who suspect that public support is slipping away, should be less selective in their choice of statistics. There is still majority support for a single currency in most EU countries except the UK, Germany, Sweden and Denmark (where opinion is fairly evenly split).

Early in 1998 all the countries, including Britain, will decide, on the basis of economic data covering the previous year, who will join a single currency in the first wave and who will not. Some countries are likely to be eligible by then. Others would be happy to see a short delay, but only because they wish to join at the outset of EMU rather than in a second wave. Yet even they are enacting bold economic reforms to show that they mean to qualify for participation at the earliest possible date.

To postpone the starting date or weaken the criteria for participation would be to remove the pressure for reform that is leading so many countries to make the neccessary structural changes which have been long delayed - and which would not take place without that pressure. Those reforms are, in any case, necessary for Europe to be competitive. Whether you want a single currency or not, they make economic sense. That is why the British government has run the economy in order to meet the Maastricht criteria, even though Britain has not committed itself to join the single currency and only has an option to do so.

Having fought hard as a Treasury minister in Margaret Thatcher's team into the early Eighties to persuade this country to pursue sound fiscal and monetary policies, I find it particularly unedifying to watch Euro- sceptics ditching their own cherished economic values, indeed the values that have served this country so well for more than a decade, just because the dreaded M-word has attached itself to them.

The writer is vice-president of the European Commission