THERE appears to be a growing consensus in the UK that, given Germany's continuing public finance problems, EMU is likely to be delayed beyond the planned start date of January 1, 1999.

Hence, it is assumed, those of us in the UK who would be affected by EMU, whether or not the UK participates, can relax and cease any preparations which might have been started. I beg to differ, and accept neither that marked delay is by any means inevitable nor that UK corporate sector preparations should be put on ice.

I accept that it is now unlikely that Germany will achieve the ''required'' 3% maximum government budgetary deficit this year. If they cannot then, it is argued, bending the rules to allow them entry would make it inevitable that Italy, Spain and Portugal would also slip through.

To avoid consequent risks of a weak euro and an uncertain start to EMU, a case is seen for delay; with the expectation that by (say) 1999 a deficit of 3% would be readily achievable by Germany. Such delay would also give the southern European countries more time to establish a track record of fiscal and monetary probity.

But in fact the Maastricht Criteria are - deliberately - flexible on the 3% target. The authors of the Treaty allowed for deficits to be above 3% on some occasions, being prepared to accept such excesses provided that they were temporary and that a move back below that threshold is anticipated.

It is the German financial community which has laid great emphasis on adherence to the 3% figure as a maximum. This was initially on the expectation that Germany would achieve this level, and would be able to use ''strict'' convergence as a means of differentiating themselves from countries whose membership in the initial core they did not see as desirable.

In my view judgments could and should be made, based not on whether the deficit marginally exceeds 3% of GDP, but on the EU member states' track record on, and sustainability of, convergence. Such an approach makes sense in terms of aiding judgments as to whether countries are ready to participate in an economic regime in which exchange rates are fixed, short-term interest rates set for the area as a whole, and fiscal policy severely constrained.

This approach should result in a suitable initial core being identified. This would consist of Germany, France, Austria, Belgium, Netherlands and Luxembourg - all of whom have a strong track record of exchange rate stability and experience of constrained monetary policies - probably plus Ireland and Finland from outside what might otherwise be perceived as a broad DM bloc.

A political/economic deal would still be required for the southern European nations. This could be privileged membership of the revised Exchange Rate Mechanism with narrow exchange rate bands related to the euro, regular reviews of convergence progress, and a fast track path to the euro held out as likely. If all were to go well they could join the core group a couple of years after the first wave.

This approach would combine the merits of enhancing the prospects for a stable start to European Monetary Union, and a relatively strong euro in the exchange markets, with the maintenance of expectations that Italy, Spain and Portugal would join in the near future - thus securing their currency stability and a continuation of their trend towards bond yield convergence.

On the domestic front, all that it is possible to say is that the UK is highly unlikely to decide in the spring of 1998 to enter with the first wave. That would require a positive referendum, followed by legislation both to remove our right to opt out and to enhance the independence of the Bank of England. The timing does not stack up.

Nevertheless, in my view the appropriate central expectation remains progress towards EMU, broadly on schedule, and involving a strong core group. The risk of some delay has increased, but if delay transpires this should be managed so as not to disturb the market confidence in the EMU process.

Finally, even with UK opting out at least for the time being, the operational and strategic implications for UK companies should not be under-estimated. These are likely to be of substance for many - whatever the stance of the post-election administration.

q.Jeremy Peat is chief economist at the Royal Bank of Scotland