THE German chancellor, Dr Helmut Kohl, has warned that Germany is itself at risk of missing the Maastricht criteria if it does not push through tax and pension reform.

Speaking after a meeting with the Italian prime minister, he also said that there was no reason why Italy should not join a single European currency when it is introduced on January 1st, 199,9.

Dr Kohl appealed to the opposition Social Democrats in Germany to work with him to break a log jam one tax and pension reforms, predicting it would open the way for new investment and cut unemployment.

He said Germany must act now or run the risk of missing the Maastricht criteria needed for the country to qualify for the planned European monetary union in 1999.

A member of the government's independent economic council, Mr Rolf Peffekoven, said record unemployment could force the government to make more budget cuts in order to meet the strict fiscal targets. German unemployment rose by 500,000 last month to 4.66 million, or 12.2 per cent of the labour force.

Speaking after a meeting in Bonn with the Italian prime minister, Mr Romano Prodi, Dr Kohl described as "unacceptable" a proposal that Italy should wait until 2000 or 2001 before signing up to European Monetary Union.

He said that under the terms of the Maastricht Treaty, the decision on who joins the single currency would be made a year before its introduction. "Nobody has a right to make that judgment now," he said. Claiming that all misunderstandings between their countries have now been "swept out of the way" the two men spoke of the economic problems shared by Italy and German "Chief among these is unemployment, which stands at 12 per cent in both, countries - a post war record for Germany.

German bankers, both in the commercial sector and in the Bundesbank, have been warning recently that Italian membership at the launch of EMU could cause chaos in the financial markets and destabilise the euro. Before yesterday's meeting Mr Prodi insisted that Italy, remained determined to join EMU in 1999 and said he would tell Dr Kohl that the recent speculation by German bankers was damaging EU interests as a whole. ,Newspapers this week reported that EU officials has drawn up a promise proposal to allow Italy to join EMU 12 or 18 months after the launch date, but Italian officials vehemently denied that such an idea as being considered, a position which Dr Kohl appeared to support yesterday.

German industrialists have been viewing the bankers campaigns against Italian membership of EMU with growing dismay, fearful of losing in an important export market. Hans Olaf Henkel, president of the Confederation of German Industry, attempted to pour cold water on the bankers remarks this week.

"I am a convinced supporter of the entry of Italy and Spain into monetary union and if possible the sooner the better. Monetary union without these two countries will not be complete and for German industry, Italy has a particular importance," he said.