Tuesday, June 10, 2003

Britain not ready for Euro

The Associated Press

LONDON - Despite the likely benefits from joining Europe's single currency, Britain won't abandon its pound until its economy converges more closely with that of the 12-nation euro zone, the Treasury chief told Parliament Monday.

Chancellor of the Exchequer Gordon Brown, in a long-awaited announcement, said four of the five economic tests he had set for Britain's membership in the euro have yet to be met.

However, his upbeat declaration of support for adopting the euro in the future marked a watershed for a government eager to prove its European credentials while at the same time safeguarding its economic independence.

"I believe a modern, long-term and deep-seated pro-European consensus in Britain about Britain's role in Europe and Europe's role in the world can and will be built in our country," Brown said.

The Labor government had set five economic tests for membership: sustainable convergence between Britain and the euro economies; flexibility to cope with economic change; impact on investment; impact on jobs; and the impact on Britain's financial services industry.

In his speech to the House of Commons, Brown said only the last of those tests had been met. But he pledged to pursue "radical" reforms that would make it possible to readdress the issue within a year. He said the government would propose legislation for a referendum on membership within months.

The expected benefits of euro membership include greater productivity, lower transaction costs for businesses and consumers, and growth in trade of up to 50 percent over 30 years with other members. But Britain's economy must first converge more closely with those of the euro members and strengthen its flexibility to withstand economic shocks, he said.

Prime Minister Tony Blair later phoned leaders of euro zone members Germany, France, Ireland and Spain to assure them that his government remains committed to joining the single currency if economic conditions are right, his office said.

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