Sunday, June 8, 2003

Britain likely to again reject switch to euro



By Ed Johnson
The Associated Press

LONDON - From Athens to Amsterdam, or Barcelona to Berlin, travelers in Europe need not change money until they cross the English Channel to Britain. Here, the euros in their pockets must be exchanged for those time-honored pounds and pence.

On Monday, in what would be a setback to the dream of ever-deeper European unity, the British government is widely expected to announce that it wants things to stay that way for now.

Prime Minister Tony Blair's government says it favors joining the single currency in principle, but the country sat warily on the sidelines when 12 of its European neighbors ditched their currencies and adopted the new euro notes and coins on Jan. 1, 2002.

Now Blair's Treasury chief, Gordon Brown, is expected to tell Parliament that the economic tests he set in 1997, which must be passed before Britain calls a referendum on euro membership, haven't yet been met.

On Thursday Brown emerged from a Cabinet meeting saying agreement had been reached on whether to join, and his choice of words reinforced expectations Britain would stay out.

The decision would be in "the national economic interest," Brown said. "We are all resolved that nothing must be done that will put the stability of the British economy at risk."

The issue has split Britain. The euro's opponents say it will weaken the economy and the nation's sovereignty.

Supporters say that if Britain spurns the euro, it will be left in the dust of a united Europe forging ahead to superpower status.

But the debate may be entirely academic.

A succession of opinion polls say most Britons would vote "no" to the euro in a referendum.

Although it joined what is now the European Union 30 years ago, Britain has often been accused of standing apart from the grand design of a united Europe. The division grew widest under Prime Minister Margaret Thatcher, who feared her free-market conservatism would be slowed by the welfarism and trade union power prevalent on the Continent.

But even after Thatcher's Conservatives were replaced by Blair's Labor Party, the ambivalence persisted. Britain, Sweden and Denmark were the only countries that opted out of the euro when it was launched for financial transactions on Jan. 1, 1999, and went live as a currency two years later.

How bad would another "no" from Britain be for the euro on Monday? Daniel Gros, director of the Brussels-based Center for European Policy Studies, said the EU is eager to have its third-biggest member economy on board - but won't be heartbroken if it doesn't immediately join.

Rejecting the euro would be a prestige blow to the architects of the new Europe. Moreover, analysts say, it could worsen Britain's already frosty relations with some of its neighbors and widen cracks that opened over Blair's alliance with President Bush in the Iraq war.



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