Greece, Italy may not make currency list

BRUSSELS, Belgium The European Union predicted Wednesday that twoof its 15 members - Greece and Italy - won't qualify to be part ofEurope's single currency.

Greece, one of the EU's poorest members, wasn't expected to makethe cut. But Italy's failing grade was a stunner. To qualify,member nations' budget deficit cannot exceed 3 percent of grossdomestic product.

Italian Prime Minister Romano Prodi dismissed the EU economicforecasts, saying they ignore "figures furnished by the Italiangovernment, (which has) adopted measures necessary to reduce thedeficit to 3 percent of GDP."Missing the euro, which will be issued in 1999, would beembarrassing for Italy, a founding EU member and a member of the G-7,the world's seven leading industrial democracies.Austrian Finance Minister Rudolf Edlinger said it would bedifficult to have a single European currency without Italy.The EU forecasts put Italy's budget gap at 3.2 percent thisyear, down from 6.7 percent in 1996, but indicate it will rise to 3.9percent in 1998.Countries wishing to participate in the European single currencyplan also must have low inflation and interest rates and a publicdebt not exceeding 60 percent of GDP.Those qualifying for the currency will be selected in early1998, based on 1997 economic data.Prodi has been fighting to cut public spending, but hard-linecommunist coalition allies oppose deep cuts in social spending.Prodi relies on them to keep his shaky center-left coalition alive.The EU forecasts also confirmed uneasiness about Germany andFrance, two countries key to the euro's success but squeaking in withforecasted budget gaps of 3 percent of GDP in 1997. Germany's gapwas expected to drop to 2.7 percent in 1998 and France's to hold at 3percent next year.The European Commission forecast these 1997 rates for other EUmembers: Austria, 3 percent; Belgium, 2.7; Britain, 2.9; Denmark,0.3; Greece, 4.9; Spain, 3; Finland, 1.9; Ireland, 1; Netherlands,2.3; Portugal, 3 and Sweden, 2.6. Luxembourg is expected to have asurplus of 1.1 percent of GDP in 1997.Britain and Denmark have, for now, opted out of the singlecurrency plan.