If you can't stand the heat, stay out of EMU

THE president of the Bundesbank outlines an uncompromising view of monetary union. Perhaps his most telling comment is that the Olympic motto - "it is not the winning which is important, but the taking part" - does not apply to monetary union.

Each member of the single currency must be winners able to match Germany's exacting pace and with the economic strength and political commitment to last in the long term.

One way to ensure this, Dr Tietmeyer argues, is to interpret strictly the Maastricht criteria for participation in a single currency. With even Germany struggling to meet the criteria, does this mean that the EMU timetable may not be met Dr Tietmeyer would not openly discuss a delay, but when pressed did say that "the stability of the ground" under a monetary union was more important than the timing.

As befits an honoured guest, Dr Tietmeyer congratulated Ireland on recording the strongest growth rate in the EU and improving its budgetary position.

However, he added, after a suitable dramatic pause, "it should not be forgotten that the Community's transfers have helped." The audience of Government Ministers, public servants, financiers and business people laughed, but the message was not lost.

The ratio of debt to national output had fallen sharply, he said, but he would not comment on whether he believed the ratio was approaching 60 per cent at the "satisfactory rate" determined by the Maastricht Treaty. Dr Tietmeyer said Ireland was on the "right track" but "he could not say" whether it would meet the criteria.

Close attention will be paid to Dr Tietmeyer's suggestion for an ERM type band to control the movement of currencies outside the monetary union, although he concedes that agreement will be difficult. This is important not only for Ireland - which will fear sterling devaluations if we join and Britain opts out - but also, as Dr Tietmeyer points out, for all other members of the monetary union.

The Bundesbank president is clearly something of a fan of the old narrow band ERM and believes the currency crisis of 1992/93 could have been avoided if member states had not suffered from the "political prestige" which stopped them devaluing on time.

A secret meeting of four states held weeks before Black Wednesday in September 1992 had been offered a deutschmark revaluation as a solution, but this was rejected, he revealed. Presumably French pride would not allow it.

Dr Tietmeyer was most animated when outlining his opposition to new financial transfers in an EMU. There have been suggestions of a stability fund, for example, to support states hit by particular economic shocks.

However, the Bundesbank president's message was that this could not happen and that all members had to be "flexible and responsive enough" to stand on their own twos feet.

While ruling out closer fiscal integration, the Bundesbank president did outline the German view of the need for deeper political integration - although not a "superstate" - to accompany a single currency.

Europe would widen with new members, he said, and develop like "concentric circles" with an inner core. The alternative to such progress, he warned, was a slip back to the EU as a free trade area.