Word: maastricht
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...most important issue for the two-headed government will be France's attitude toward further Europe integration. Citing the late Socialist President Francois Mitterrand's leading role in negotiating the Maastricht Treaty, which sets the rules for combining Europe's currencies, the Socialists claim to be staunch supporters of the monetary union. But there is an obvious contradiction between Jospin's economic policies and the Maastricht requirements. "Their economic recipes are diametrically opposed to what is needed to join the euro," says Pierre Lellouche, a foreign policy adviser to Chirac. Seeking to calm such fears, Jospin said last week that...
...probably won't go in on the first round. For the other states, the problem is the criteria for entry. To begin with, only members of the European Union may join, so that excludes all the former Warsaw Pact states. Then the applicants face strict requirements set by the Maastricht Treaty of 1992. At the top of the list is the demand that a country's budget deficit must not be higher than 3% of its gross domestic product. That is a tough one, and most European governments have been energetically slashing budgets (read welfare programs) and raising taxes...
Next year is crucial for the euro, which formally begins circulating in 1999. Economic performance in 1997 will be the basis for deciding, early in 1998, which nations meet the Maastricht Treaty criteria on debt, deficits and inflation that underlie the currency union. Bundesbank policies can help or hurt plans by many countries, including Germany, to meet the criteria by boosting economic growth. But more important, Tietmeyer's mere utterances, like those of his U.S. counterpart, Alan Greenspan, can move markets or puncture investor confidence. His blessing of the euro venture would be a welcome seal of approval...
...public, Tietmeyer backs the single-currency idea. But he has been adamant in calling for strict application of the Maastricht criteria and for ironclad rules to support the euro, so that it will be as strong as the German mark. Some believe that privately he is a single-currency foe fearful of losing his power to the new European Central Bank. Former German Chancellor Helmut Schmidt, in an extraordinary open letter last year, branded Tietmeyer's stance as anti-European. "If you continue with your stubborn policies," Schmidt wrote to the banker, "Germany will become isolated...
...based on a stable and solid foundation." But he quickly adds, "It is my duty and responsibility to see that there are enough safeguards." One moment of truth will be early next year when Europe's central-bank governors issue their judgment on which countries have truly met the Maastricht criteria without accounting tricks. While Tietmeyer hopes for a consensus report, he allows, "We have agreed that if necessary, we would present different views." If they do, his are sure to carry a special weight...