Single currency back on track for 1999 start

After months of buffeting, the European single currency is back on course and is heading for a January 1999 launch as planned.

This was the overwhelming message from the informal weekend meeting of European finance ministers meeting in the Dutch coastal resort of Noordwijk.

The 15 finance ministers, as always, had a vested interest in propagating such a message, given the enormous political stakes their governments have in the project. However, on this occasion, their statements coincided with renewed signs of economic optimism within key member states. Signs have emerged of recovery in Germany's industrial output and in French growth.

Buoyancy has also been re-established by the decision of Helmut Kohl, the German Chancellor, to stand again for election in 1998 - a move which has been viewed in the markets as a clear sign that the Chancellor is determined to see his project through.

Political statements in Noordwijk were also underpinned by a further round of key decisions on how the single currency will come into being, including an outline decision on the timetable in the 1998 run-up, and endorsement of the stability pact to keep countries in line after the launch.

Most significant was the agreement that a special EU council, to decide which countries meet the economic criteria for joining EMU, will be held in May 1998, eight months before the launch on 1 January 1999. Rulings will be based on economic figures for this year.

Agreement on the timing for these crucial rulings underscores just how little time a British government will have to decide whether to join at the launch. The special council, to be attended by all EU heads of state, will take place under the six-month British presidency of the EU, which starts in January 1998.

However, it was confirmed at the weekend, that the council will take place in Brussels, not in Britain, thereby avoiding embarrassment for a British Government which might, by then, have decided to "opt out".

Nevertheless, Britain will host the informal finance ministers meeting in April 1998, when final plans for the special council will be laid. Kenneth Clarke, the Chancellor, said at the weekend, that the informal finance ministers' meeting was likely to be held in York.

Had European Union governments been seriously contemplating delaying the launch of EMU, most observers believe there would, by now, be signs of preparations under way.

The last time the EU couldmanage a delay without massive disruption, would be at the Amsterdam summit in June, say analysts. Beyond June, the costs of turning back - in terms of political damage and market chaos - would become more prohibitive than the risks of carrying on, whatever the doubts.

Even Mr Clarke, however, had to admit on Saturday that this was not the case. The Chancellor, keen to attend what could well have been his last European finance ministers' meeting, despite the election cam- paign, stoutly tried to maintain the government position that the launch of EMU on 1 January 1999 "is unlikely".

Whether the launch does go ahead on time now depends on whether enough counties manage to meet the economic convergence criteria, and that will become clearer by the summer.

France, however, is already saying it is now confident and Theo Waigel, the German finance minister, said at the weekend he was sure Germany could bring its public deficit down to 2.9 per cent of gross domestic product this year - under the 3 per cent ceiling. There have been growing signs in recent weeks that member states will be prepared to massage figures if necessary to come into line.

The clearest sign yet of German political determination to see the single currency plan launched on time came at Noordwijk when Mr Waigel indicated he would prepared to countenance a flexible interpretation of the entry conditions if Bonn is unable to bring its deficit down to three per cent of GDP by the end of this year.

"I have never nailed myself to the cross of three per cent," he told reporters. "When I said last year that "three per cent is three per cent" I did not say that three point nought per cent is three per cent."