That was the week that was for EMU

Sarah Helm puts a finger on the pulse of the single currency

Brussels - Has this week been good or bad for EMU? Has the needle of the Euro-barometer moved towards "Yes" ( it will happen on time) or "No" (it will not). Or is it impossible to say?

MONDAY: The week begins with the needle pointing towards "Yes." New displays of "political will" from European politicians have brushed aside weekend warnings from German business leaders, claiming that if Italy joins at the start, turbulence would ensue. "It will happen on 1 January 1999," declare the politicians. "It is in the treaty - article 109j". The markets start the week agreeing with the politicians. Dealers assessing news reports are also betting on a 1999 launch with Italy among the first members. Reports that a "stability council" of EMU countries is to be set up after the launch have shown the markets the project is taking shape. By midday, however, the Euro-barometer is flickering. New guidelines announced in Brussels will make it easier for countries to meet the economic rules for entry. On the face of it this should be good news for the euro. Italy would be able to reduce its deficit and Belgium will be able to sell gold to reduce its debt.

However, the guidelines raise fears that the rules are to be "fudged" to meet the deadline. Fears grow in Germany that the euro will not be as stable as the mark. German Euro-sceptics raise their voices. The markets begin to jitter. Confusion is increased by news in Britain that Labour might take Britain into the euro in 2002. Is this a show of support for eventual membership or another vote of "no confidence" in the 1999 launch?

TUESDAY: The needle continues to flicker. A survey shows most bankers believe the euro will be introduced on time but the same survey shows only one in four banks has done anything to prepare. They complain they have received "no clear statement" from software suppliers on how to change their computers.

Whatever politicians and the markets believe, the banks "may not be ready", the survey says. Consumers are far from ready. Eurocommerce, representing European retailers, says major education and advertising must be launched within six months or "it will be too late" to prepare people. Fears grow that politicians are wary of giving the go-ahead for an education campaign because they are secretly unsure the 1999 launch will go ahead.

WEDNESDAY: The Financial Times runs a story saying Italy's entry to the single currency may be delayed and Rome may be offered a face-saver deal to enter by 2002. Again, the Euro-barometer flickers. Is this good or bad? It could be said delaying Italy's entry will increase the chances the single currency will happen. German public opinion is likely to support the project if it knows that the lira is to be kept out for now. It could also be said that the report shows the EMU "hard core" is starting the serious deals to ensure the launch can go ahead.

On the other hand, talk of delaying Italy's undermines confidence in the project. The report has maddened Italy, as well as Spain and Portugal, who smell a German plot to keep them out at the launch. The report of an Italian deal has unsettled the markets. Reading the Financial Times, dealers have started deserting the lira. Rome's job of meeting the economic criteria for the launch could be made more difficult.

THURSDAY: Fears grow that the Financial Times report could become a self- fulfiling prophecy, as market jitters continue. To scotch fears, denials of a pending "Italian deal" are issued. Calm is restored. Yves Thibault de Silguy comes to Britain and declares 1999 will see the euro launch.But confidence has been undermined.

FRIDAY: News of massive German unemployment deepens the gloom. Warnings come that Germany itself has little chance of meeting the rules for the 1999 launch. Helmut Kohl, the German Chancellor and Romano Prodi, Italy's Prime Minister, issue reassuring statements in Bonn. It is still more likely than not that emu will happen on time, but less likely than it was at the start of the week.