FT 97-06-28 Amsterdam: Bundesbank denounces 'toothless' pact By Peter Norman in Bonn
European economic and monetary union is "more than ever in the balance" because the stability pact agreed at last week's Amsterdam summit "lacks teeth", Mr Reimut Jochimsen, a senior member of the Bundesbank's governing central council, warned yesterday.
In a scathing review of progress towards the single currency, Mr Jochimsen said the "ragbag" and "patchwork" of decisions agreed at Amsterdam did nothing to correct the "lopsided construction" of Emu...
Mr Jochimsen yesterday warned that Emu's "inadequate economic and political foundations" and unresolved economic policy differences between Germany and France's new leftwing government "may lead to the disaster of political disintegration" in Europe...
Mr Jochimsen, who is president of the regional central bank of North-Rhine Westphalia, Germany's most populous state, has made no secret of his doubts about Emu in the past. But his remarks yesterday at Bonn University's Centre for Research on European Integration were unusually forthright and sensitively timed...
Yesterday, Mr Kohl made a strong declaration in the Bundestag, the lower house of parliament, that he was "certain" the euro would be introduced on schedule on January 1 1999 as a stable currency in full compliance with the Maastricht Treaty criteria. But Mr Jochimsen warned that in Germany's case "it is becoming ever more apparent that it will be difficult to meet the budget deficit criteria" and "almost impossible" to meet the further condition limiting public debt to 60 per cent of GDP.
The choice of countries for Emu in spring 1998 was "at risk of becoming increasingly political in nature", he said. "The last thing we should do is to create the impression that the common currency is going to be pushed through at any price, by hook or by crook".
Mr Jochimsen said the stability pact agreed in Amsterdam had not resolved "far reaching and historically rooted differences in experience and attitude" among potential Emu members. "Opinions still differ as to just how far the commitment to budgetary discipline should go in the lead-up and in the final stage of Emu," he noted. There was "hardly a trace" of the originally proposed "quasi-automatic" sanctions in the pact...
The use of creative accounting to launch Emu with a large number of members would build Emu "on very shaky to foundations," he warned. Such "pure political opportunism" risked "a serious crisis of confidence".