Outlook: Is EMU orthodoxy too good to be true?

Eddie George has long had his doubts about the economic viability of the single currency, seeing it as a politically-driven project. Yesterday he was more outspoken about them than he has been before - a luxury he can afford as the central bank governor in a country whose political commitment to EMU is tepid to lukewarm.

Economists can cheerfully argue indefinitely about the pros and cons of EMU, some sharing the Governor's concerns and some downplaying them. But he did touch on one aspect of the political economy of EMU that has been little discussed so far. That is the common assumption that Europe's politicians will continue to behave with the utmost economic probity once the single currency is under way.

So keen is every would-be member to emphasise ahead of the crucial decision in May that they qualify to join on both the Maastricht criteria and broader measures of economic convergence that virtually every politician has been talking like a central banker. For public consumption, they all swear blind they believe in keeping the European Central Bank free of political interference and sticking to the tough budget requirements of the stability pact. Some speak of the need for structural reforms and "flexibility", albeit in coded terms. And anybody who is calling for bigger tax transfers between countries or restrictions on trade with non-members is painted as a voice in the wilderness.

Is this pan-European commitment to economic orthodoxy too good to be true? Mr George obviously believes it will be back to business as usual after 1 January 1999, with politicians responding to the pent-up pressures to do something, anything, about high unemployment. He is doubtful about the argument that the existence of the Euro will in itself force structural reforms on reluctant member states.

Perhaps the Governor is too suspicious of the politicians, and perhaps the governing classes have been persuaded by the economic arguments. But even if he is, and they have, when the heads of state make their decision in May they must consider the pressures they are going to face when they can no longer use the argument that what they are doing is necessary to qualify for the single currency