British minister raises membership stakes on back of successful launch of currency
The British government yesterday came closer than ever before to suggesting British membership of the newly launched euro was inevitable.
The Europe minister, Peter Hain, asserted it was not sustainable for sterling to co-exist indefinitely alongside the new European currency.
Conservatives immediately claimed that the Blair government was trying to drive a sceptical, but fatalistic British public into the euro by stressing its inevitability. Polls are showing big increases in the numbers who believe it will be impossible for sterling to stand alone.
Mr Hain, speaking on the day of the euro’s launch, said: “I doubt in the end that it is possible to run a sort of parallel currency economy”.
This was the furthest a senior British minister has gone in revealing government thinking in what is widely seen as the decisive year in determining whether Tony Blair will risk a referendum.
Mr Hain has been given licence by Downing Street gradually to harden the pro-euro case without undermining the primacy of the five economic tests or the authority of the chancellor, Gordon Brown, in determining whether those tests have been met. But Mr Hain later stressed that his remarks did not change government policy.
But there is a growing belief in government circles that on the back of the euro’s successful launch, Mr Blair would like to hold a referendum next year, and the Foreign Office is now backing the move.
In theory, Mr Brown does not have to announce the result of the Treasury assessment until June 6, 2003, but Mr Hain said he expected earlier publication. He also stressed the psychological impact of the euro’s arrival.
“The euro is real now. It will cease to be that source of myth, prejudice, fantasy and fear and become a practical day to day reality. That will enable people to make a sensible decision about it, and I welcome that”.
He added: “The increasingly urgent question for British citizens is whether we want to get left behind yet again as we have been consistently in Europe.
He also repeated Foreign Office warnings that British political influence would be reduced if the Blair government ruled itself out of membership indefinitely.
“We can be a leading power, as we already are, but if we want to be a decisive leading power, it is difficult to see how we could be that if we ruled ourselves out of joining the single currency for ever”.
Some cabinet ministers believe that if Mr Brown ruled next year that the British economy was not sufficiently converged with Europe, then Euopean leaders would dismiss Mr Blair’s leadership.
The Conservative chairman, David Davis, said the government was deliberately presenting resistance as futile. “The fact that they are trying to ride the argument of inevitability demonstrates actually how weak their case is, that there aren’t stronger arguments, he said.
He claimed the only test that really mattered for the government was whether Mr Blair believed he could win a referendum.
But the shadow chancellor, Michael Howard, denied that “euro creep” – where Britons get used to handling the currency both abroad and at home – would bamboozle the British public.
The former Conservative chancellor, Lord Lamont, accused Mr Blair of trying to introduce the euro surreptitiously.
But the European Commission president, Romano Prodi, led a group of EU officials and European political leaders in voicing hopes that a successful euro would convince sceptical Britons to sign up.
Mr Prodi said he would not forecast when Britain would join since he knew any interference in British politics was negative. He said the UK was an essential part of Europe, and Europe would profit from Britain’s involvement
The French European minister, Pierre Moscovici, was starker: “Tony Blairs ambition was that Britain would have leadership in Europe and I believe it is impossible to have a leadership when you are not in the main political realisation, which is the euro.
The Treasury is refusing to give a running commentary on Britain’s progress in meeting the five economic tests, including sustainable convergence. However, four days before Christmas, the Treasury submitted to the European Commission its “convergence programme for the UK .It concedes that long-term interest rates in Britain and Euro area are now closely aligned at 4.9% and 4.8% respectively. But it states that EU countries “face different starting points in the challenge to achieve high levels of both productivity and employment”.
The report also reveals little closing of the gap between the sterling and euro exchange rate. but the Treasury report rules out setting an exchange rate target, arguing experience shows targets “lead to less, not more stability, in the medium term”.
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