The probability of Germany joining EMU at start date is probabily UNQUESTIONABLE. Afterall, if Germany does NOT qualify, there will be no EMU. Still it is important to note that without fudging the books itself, Germany would NOT meet its own criteria for which it fought so hard and long to insure.Chancellor Kohl continues to be the primary political dribing force behind EMU within Germany and throughout Europe as a whole. Personally, EMU remains his dream and he is interested in making history. He unified Germany and next he wants to riase the old European State of centuries long ago. With his sheer will behind this project, EMU will take place even if the criteria has to be made even more flexible than it is now.
Still, Kohl’s great task remains to push, bargain and sell the Single Currency idea to a sceptical German public. The average German citizen tends to believe that the Euro will be worth less than a dmark when the dust settles. This has contributed greatly to hoards of German capital fleeing in particular to the UK, US and even Canada. This is the primary reason why Kohl has made a major effort to secure a rigid stability pact at the Dublin Summit in December 1996.
The German economy, nonetheless, remains stuck in a sluggish economic growth cycle. Unemployment continues to undermine the political process within Germany despite the fact that there is not credible opposition to Kohl at this time. The tight monetary policy in Germany is a double-edge sword, which threatens the domestic economy despite the fact that book fudging is also going on relative to the gold reserves. Without “cooking” the books, Germany will fail to meet its own Maastricht budget deficit criteria. Still, in the final analysis, EMU will go ahead at “any cost” as did German unification. If for no other reason than Kohl simply wants his name in history and he believes that in the long-run, it will succeed.
|Budget Deficit / GDP||3.5||3.9||3.2|
|Debt / GDP||58.1||60.8||61.9|
|10Y Bond Yields||6.8||6.2||5.9|
© Princeton Economic Institute