That is what friends are for

Date: 24/10/1996

NOBODY would blame Yves-Thibault de Silguy for talking up the chances of Europeans having a single currency from 1999.

With only 550 working days to go until Germany and at least another five countries are due to lock their exchange rates, the ever-cheerful Economics Commissioner can be forgiven for adding both urgency and encouragement to the debate over the euro.

The economic forecasts being put together by his services will give him just the ammunition he needs to dispel the Eurosceptic gloom coming out of London and the dark Franco-German warnings against premature entry tickets for Italy and Spain.

The figures show that Germany has proved to be the Union's locomotive yet again; its growth surge during the spring feeding into the rest of the EU economy. Inflation seems to have been licked in most member states and the growing realisation in the financial markets that the euro really is on its way has caused long-term interest rates to collapse.

With interest rates and inflation down and currencies stable, few would doubt that a majority of member states will meet three of the Maastricht Treaty's 'famous five' criteria by the end of 1997. So far, so good. The problem lies in the remaining two budgetary criteria - hardly a mere detail. The Commission will, once again, go out on a forecasting limb and predict 1997 budget deficits for France and Germany below 3&percent; of GDP on the basis of their current policies.

Would it hurt so much to be realistic? Like the Commission, Deutsche Bank's economics department is utterly convinced that the German government will do whatever it takes to get its deficit to the magic 3&percent; figure in 1997. Yet, even this pillar of the Frankfurt establishment acknowledges that this will require spending cuts or tax increases worth around 3 billion ecu over and above what is already on the table. As for France meeting 3&percent; next year, the Commission is in a minority of one.

De Silguy's services are packed with highly-skilled economists, but the euro project is an even less exact science than normal economics. A good friend is not only the first to congratulate you, but also the first to offer constructive criticism when necessary. Such a role will become ever more vital for the Commission as the final euro countdown approaches.