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Italy's Prodi-1998

data may be used

for EMU

BONN: Italian Prime Minister Romano Prodi raised the possibility on Tuesday that countries which fail to make the grade for a single European currency next year could still qualify on the basis of their performance in 1998.

Prodi's remarks, at a news conference in Bonn after talks with Chancellor Helmut Kohl, threw into question the position adopted by European leaders in Madrid last year. They had said the decision would be based purely on economic data for 1997.

"The economic situation is worsening, not just in Germany but in France and Italy too," he told reporters. "The economic situation means the timetable becomes less rigid."

Asked if the decision on who will take part in European Economic and Monetary Union (EMU) could take place on the basis of 1998 instead of 1997, Prodi replied: "I think so. There could be a slide to 1998, even though there is a strong strategy to respect the timetable."

Prodi said slow economic growth across Europe meant it would be hard for countries to meet the strict fiscal and financial criteria for EMU based on data for 1997, making 1998 figures a plausible alternative.

A decision based on 1998 data could be in Italy's interests because economists say the country has little chance of meeting the criteria based on economic data for 1997. The single European currency is scheduled to be launched in 1999.

Prodi said he expected the lira to be back in the exchange rate mechanism of the European Monetary System, the currency framework designed to ensure stability ahead of EMU, by the end of the year.

The 56-year-old economist, making his first foreign trip since taking office at the head of a centre-left coalition earlier this month, said a slowdown was evident across Europe.

Growth in Italy for 1996, which the government had originally expected to run at three percent, was now forecast at around 1.6 or 1.7 percent, he said.

Prodi said he and Kohl discussed how a stable Italian government could benefit the whole of Europe. Prodi heads Italy's 55th post-war government.

"Italy needs Europe but Europe needs Italy just as much," he said. Italy holds the European Union's rotating presidency until the end of June. Prodi said he and Kohl had reviewed preparations for next month's EU summit in Florence.

Prodi said they had also discussed Britain's "work to rule" over EU business -- a protest at a worldwide ban on British beef and beef products imposed amid fears "mad cow disease" could be transferred to humans by eating beef.

Prodi said the beef crisis was already having an effect in Italy. "Our inflation control strategy would already be having success if it weren't for the higher price of beef," he said.

But both Germany and Italy were confident a solution to the crisis could be found, he said.-Reuter