GERMANY yesterday signalled that it would seek a flexible interpretation of the Maastricht target for debt to enable its participation in economic and monetary union.

Mr Theo Waigel, German finance minister, blamed "exceptional circumstances", notably the cost of German unification and railway privatisation, for a rise in public sector debt this year.

Under the Maastricht treaty, countries can qualify for EMU if they show that their stock of debt is below 60 per cent of gross domestic product or falling at a satisfactory rate. Under Germany's EMU plan, total debt - already above 60 per cent of GDP - is forecast to reach 61.5 per cent of GDP this year.

Mr Waigel's remarks, made at a meeting of EU finance ministers, was the first glimpse of flexibility in Germany's interpretation of the Maastricht criteria.

But the finance minister stuck doggedly to the EMU deficit target. "I always said that 3 means 3. I never talked about 60."

The finance ministers welcomed the latest efforts by France and Germany to meet the Maastricht criteria in 1997, including the crucial public sector deficit target of 3 per cent of GDP.

Earlier, Italian and Spanish bonds fell sharply on renewed fears that European economic and monetary union might be delayed after Mr Waigel restated in a German newspaper interview his posit ion that the Maastricht criteria would take precedence over the timetable for EMU, due to be launched on January 1st, 1999.

Finance ministers seized the chance yesterday to reaffirm the EMU timetable after scrutinising French and German plans to comply with the Maastricht targets in 1997.

EU leaders are due to select EMU participants in the spring of 1998 based on this year's economic data and on whether countries' performances are sustainable.