May 5, 2003
Britain's Long Debate on Embracing the Euro
ONDON, May 4 The long debate that was supposed to produce a verdict this month on whether to push for the euro as Britain's currency has instead lapsed into a contest over how much longer to postpone the final reckoning.
Reaching a decision on the euro was never going to be easy because it is a freighted subject in Britain, extending well beyond economics to engage the politics of sovereignty and national identity. Some Britons dismiss this island nation's traditional standoffish relationship with the Continent as dated, but many others consider it defining.
The issue has caused divisions within business, labor unions and political parties since Labor came to power in 1997 promising, as Prime Minister Tony Blair described it, to fulfill Britain's destiny to be at the heart of Europe.
It has also attracted public attention because it sets Mr. Blair at odds with his internal rival for influence over Britain's future, Chancellor of the Exchequer Gordon Brown.
Mr. Blair, an advocate of the euro, has always promised that the decision would be put to a referendum, and, on being elected to a second term in June 2001, he vowed to declare within two years whether Britain would hold a vote.
Anticipating that deadline, Mr. Brown, a skeptic on the euro, will shortly announce the results of an exhaustive Treasury examination of whether the euro meets five economic tests he set out in 1997 to measure whether entry would be good for Britain.
The tests examine whether joining the single currency would be good for jobs, for foreign investment and for the financial services industry. They also test whether the British economy is in line with those on the Continent and whether there would be enough flexibility in setting business strategies and wages. Mr. Brown's verdict is expected to be "not yet," and Mr. Blair is powerless to refute the finding because he has endorsed the five tests.
Backers of the euro have instead fallen back to a position of pushing for an early reassessment of the tests and a new judgment call before the next election, expected in 2005. Treasury officials say Mr. Brown wants to put off all thoughts of a referendum until after then.
Mr. Blair refused to answer questions about the euro at a news conference last week, but his former cabinet minister and political confidant Peter Mandelson told the London Chambers of Commerce that staying out of the euro would cost Britain jobs, growth, productivity gains and foreign investment.
"If business takes seriously the belief of no single currency for Britain before 2010 at the earliest, then the loss of confidence will be severe," said Mr. Mandelson, who is said never to make public remarks without Mr. Blair's prior knowledge.
There is a move in Mr. Blair's cabinet among pro-euro ministers to have a formal debate in an effort to wrest the issue from Mr. Brown's domination. Mr. Mandelson endorsed that course of action, saying: "There is still time to get this decision right. I hope, for all our sakes, the door is not slammed shut again."
Britain, Denmark and Sweden are the only European Union countries that have not adopted euro notes and coins, and more than 300 million Europeans now use them as their national currency. The 12 countries that made them legal tender in January 2002 are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. Many of the 10 countries from Eastern and Southern Europe soon to enter the union are likely to want to join them.
Mr. Blair had hoped that British travelers' acquaintance with euros and the ease with which the Continent adapted to the new currency would reduce opposition at home, but 62 percent of Britons surveyed for a poll published last week in The Daily Telegraph said that if a referendum were held now, they would vote no to the euro, while only 28 percent said yes.
Opponents of the euro point out that Britain, with its pound sterling, has more economic stability, lower inflation and less unemployment than the countries in the so-called eurozone. They say bringing Britain under the common "one size fits all" interest rate set by the European Central Bank in Frankfurt would restrict London's influence over its own economy and bring its front-running performance to a halt.
In a budget statement last month that was interpreted as portraying his skepticism toward the euro, Mr. Brown said the Bank of England's freedom to set interest rates was helping Britain to survive economic uncertainty. He noted that overall growth in Britain was 2 percent in 2001-2002 compared with only 1.1 percent in the eurozone.
George Eustice, director of the "No" campaign against British entry, said he found those comments reassuring. "Having said that Britain's economic framework is delivering growth and stability while the eurozone is suffering high unemployment and low growth, he has no option but to conclude that now is not the time to join the euro," Mr. Eustice said.
With decision day approaching, the cross-party treasury select committee of the House of Commons moved up the release date for its own study of the matter to last week, but issued a mixed verdict that gave comfort to both sides. The committee said there had not been enough progress to meet the chancellor's five tests. But it also concluded that ruling out the euro would close a "window of opportunity" for Britain to exert influence in Europe.