GERMANY'S plans to plug a hole in state books are an accounting trick which could put European monetary Union at risk, Italian Foreign Minister Lamberto Dini told the International Herald Tribune in an interview published on Friday.

"By doing this, Germany could put in jeopardy the healthy functioning of European monetary Union," he cautioned. German Finance Minister Theo Waigel has indicated that he wants to revalue gold reserves and sell-off state holdings to offset budget shortfalls.

After widespread criticism of Italy's own recent budget measures, particularly from Germany, Dini turned the tables. "I would be very surprised if the German government were to have recourse to accounting gimmicks such as the use of asset sales or a revaluation in order to meet a revenue shortfall for 1997," Dini was quoted as saying. "This would open up a wider gap than expected in 1998, thus making precarious the respect and sustainability of the stability pact," Dini added.

Italy has introduced around 100 trillion lire of deficit cutting measures over the last year as it bids to make the grade for the single European currency.

However, European partners have criticised many of the measures, saying they are of a short-term nature and urged Rome to introduce structural expenditure cuts. Meanwhile in Bonn, Germany's controversial plan to revalue gold reserves to plug its gaping budget deficit drew charges of "cheap budgeting tricks" from the country's leading tabloid and one top business daily. The mass-circulation Bild Zeitung said the Finance Minister Theo Waigel's plan to lift the gold's book value to near market prices amounted to "witchcraft." "The Waigel miracle — a billion-mark hole disappears overnight," Bild said.

Business newspaper Handelsblatt also criticised the run-upto the plan, which would raise the value of Bundesbank gold reserves by 40 billion marks and help Germany qualify for European monetary and economic Union (EMU). "The budget fever of the last days is shameful for a state of the economic ranking of Germany," the paper said in an editorial. "It disturbs the citizens, drives away companies and frightens investors."

Likewise, Die Welt said the plan "hurts confidence in the stability structure" of Germany. "It would be better to look for savings possibilities together with (opposition Social Democrats)," the paper said. "If only to have confidnece in policy." In contrast, the Financial daily Boersen-Zeitung gave cautions approval of Waigel's last minute plans.

Revaluing the reserves was "sensible," the daily said, criticising only the hectic pace at which the plans came public.

"A higher valuation of the gold reserves of the Bundesbank is overdue, because all European countries taking part in EMU are valuing their reserves at market prices and putting part of them into the founding of the european Central Bank," the newspaper wrote.

Thursday morning the Handelsblatt wrote about the plans to revalue gold and hours later Waigel helicoptered to Frankfurt from Bonn for an unannounced visit at the Bundesbank only to later rush back to Bonn to explain plans to journalists.

Germany currently values its 95 million ounces of gold at 144 marks per ounce -- well below the market price of 600 marks.

Waigel wants to revalue the reserves and to sell-off state holdings to offset budget shortfalls — now estimated to be 18 billion marks higher than previously expected — caused by high unemployment. Waigel on Thursday unemployment would average 4.3 million in 1997.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.