The move toward a European single currency is beginning to resemble a nightmare wedding: The participants know they are making a mistake, but the arrangements have been made and it seems too late to draw back.
This week an impressive array of German economists wrote a letter to The Financial Times calling for an "orderly postponement" of the plan for European economic and monetary union (EMU) on the grounds that the participants are not yet ready.What the 155 economists said in public is what many politicians and officials say in private. They know that, one way or another, most countries are fudging financial statistics that will determine whether or not they are allowed to join.
In theory, countries cannot participate in EMU unless they have achieved strict standards in their economic performance, with respect to inflation, interest rates, exchange rate stability and budgetary rectitude.
The real questions center on budgetary performance, and many countries are blatantly "fiddling the figures" to come up with budget deficits of 3 percent and debt/gross domestic product ratios of 60 percent or less. Few serious experts believe countries are capable of sustaining such figures, even if they "make it" for the year in question, namely 1997.
In the next few weeks, all the major European countries will report their version of how they performed last year. And in late March the European Commission and the European Monetary Institute (the embryonic European central bank) will pronounce on the candidate countries' ability to participate in EMU on a sustainable basis.
The Brussels-based EC, whose raison d'etre is ever closer union, has a huge vested interest in the launching of EMU. It is virtually impossible to believe that they will even attempt to veto the chances of any of the 11 countries - even Italy, Spain and Portugal's - embarking on EMU.
Italy, Spain and Portugal have been making heroic efforts to fulfill the so-called "Maastricht criteria" for membership of the single currency. But their track records on inflation and budget deficits make it difficult to believe that they are ready to tie themselves to hard currency Germany for the indefinite future.
Under the single currency, such countries would lose the safety valve of the exchange rate allowing them to adjust their economic policies from time to time. Moreover, if the proposed European Central Bank turned out to be as hawkish as Germans intend - and has been written into the statutes - then such countries could have a very rough time indeed.
It is no secret that most European central bankers believe that the single currency - which will merge what are currently widely differing inflation rates - could be an unmitigated disaster. If the EMI values its reputation for integrity, it could come out with an explosively skeptical report on the chances of sustaining a broad-based "euro" - that is, a monetary union that includes the "Club Med" economies.
The sheer political will behind this marriage of up to 11 disparate currencies means it will probably go ahead. That is certainly what the financial markets are saying. But somebody could yet have the courage to panic on the way to the altar.
Dist. by Scripps Howard News Service.