The Germans, it is commonly observed from outside Germany, are reluctant to give up the D-Mark, and strongly oppose European economic and monetary union (EMU) for fear of higher inflation. From within Germany, the picture looks rather different. Whether or not a German is for or against EMU depends critically on how the question is phrased and, to a lesser extent, on his or her profession.

At first sight, the outsiders seem to have it right. A solid majority in Germany does answer 'no' when asked 'would you like to give up the D-Mark for a common European currency?' More than 80% of Germans are at least somewhat proud of the D-Mark as a symbol of German economic strength.

But a solid majority in Germany also affirms that they are in favour of EMU as a significant step towards closer integration in Europe. Only a third of the population wants to slow down the pace of integration. Most see closer integration as a guarantee of peace. And a majority of the German population seems willing to accept monetary union as a quantum leap of European integration.

The political significance of this attitude was demonstrated in the last round of state elections in the spring of 1996. Some SPD politicians tried out an anti-EMU position as part of their campaign against the CDU. But the experiment came to no avail: when the fired back by equating opposition to monetary union with putting obstructions in the way of greater Europe integration, the SPD dropped their anti-EMU line.

Anti-European positions simply go nowhere in German politics today. It seems a safe guess that monetary union will not play a large part in the 1998 electoral campaign. None of the major parties will dare touch the issue for fear of being called anti-European.

So the outsiders have it wrong after all: the Germans are willing to accept EMU, but they accept it as the price for political union in Europe. This position has been made most explicit in the Bundesbank's warning that monetary union cannot succeed without political union, although the vision most Germans hold of political union remains very vague. So far, the Kohl government has successfully avoided drawing up a list of conditions that would define the minimum acceptable political union. This is a position that will allow Mr Kohl to sell even small steps in that direction as a significant achievement of his policy.

The generalized characterization of the 'German view' of EMU conceals a more complicated and differentiated reality. A majority of German economists for example, remains sceptical, if not opposed outright, to EMU. The German financial sector, on the other hand, is firmly in favour: the three largest commercial banks, in particular, are pushing hard for monetary integration in the expectation that they will be among the main players in the emerging European financial market.

German businesses also expect monetary union to come, but remain doubtful about the timing. A large majority of companies has yet to start gearing up to use of the Euro. Fears that the D-Mark will be even stronger if monetary union fails, and that this would make winning business abroad even harder, certainly contribute to the willingness German business to accept monetary union - a position that is not too far from the French fears of competitive devaluation.

Meanwhile, the vast majority of the population takes little or no notice of the debate over strategies to achieve monetary union. There is demand for information but little interest in the controversies among experts. As almost half the population thinks that the CDU government would be the most competent party to manage the introduction of the common currency, the government has little to fear from the issue.

So German attitudes towards monetary union are not as negative as they are commonly painted outside the country. It is often said that the Bundesbank opposes monetary union for obvious reasons of self interest and that it has persuaded the German public to take a similar stand.

Certainly, it is true that the German population trusts the Bundesbank's expertise in monetary matters, giving it considerable clout in shaping the institutions of the European currency. But the idea that the Bundesbank alone could determine Germany's position in what is regarded as a very important part of Europe's future is, at best, a caricature of German politics and, at worst, reflects a bad misunderstanding.

In fact, the risk to EMU in Germany today is increasingly on the fiscal side. Originally intended as a political gimmick to counter the SPD's allegation that the government was too negligent of the inflation risk created by fiscally profligate members of EMU, Mr. Waigel's proposal of a stability pact hardening the limits on national government deficits has earned more recognition outside Germany than inside, where it does not benefit the government politically. Indeed, my analysis of international evidence suggests that deficit limits of the kind embedded in the Waigel pact do little to control government debt.

More significantly, Mr. Waigel's and Mr. Kohl's repeated assertions that the fiscal criteria for EMU will not be weakened have forced the government to cut the deficit by raising taxes and slashing welfare benefits in the face of what is already a sluggish economy. Some of my recent empirical research illustrates that such a strategy, if adopted by a majority of the EMU candidates, risks pushing the European economy into a severe recession.

The resulting mix of weak or negative growth, increasing unemployment and protesting labour unions is hardly promising for a happy transition to monetary union. In such circumstances, the quiet German resistance to monetary union may become more outspoken if unions and opposition parties present rising taxes and the removal of the welfare safety net as the price for Mr. Kohl's strategy of political union through union.

Jürgen von Hagen

Professor of Economics at Universität Bonn, Indiana University and Research Fellow in CEPR's International Macroeconomics programme.