Britain’s government announced on Monday that the time is not yet right to switch from the pound to the euro. But a pro-euro push for the coming years is already in the works.
The British have been against adopting the euro since its introduction on the continent in 2002
When he addressed the House of Commons on Monday afternoon, no one was surprised by what Britain’s Chancellor of the Exchequer Gordon Brown had to say.
His announcement on whether or not Great Britain is ready to adopt Europe’s common currency was an open secret. Newspapers across the country had already leaked the Brown opinion that economic conditions are not yet right for Britain to drop the pound for the euro.
In a formal presentation to Parliament, Brown outlined his arguments for holding back on joining the 12-member euro zone. He said that three of the five self-imposed economic tests on the benefits of adopting the common currency had not been met. There was not yet sufficient convergence between the economies of Britain and the euro zone or sufficient flexibility, Brown stated.
The five tests evaluated the impact the euro would have on the British economy, financial services, jobs, housing and investment. The decision was based on the "most rigorous and comprehensive assessment that the Treasury has ever done on an economic issue," Brown told the press on Sunday.
"Right at the center of it [the decision] is what is the national economic interest for the future and that is why the five tests are so important," he told BBC television Monday morning before addressing Parliament. "In principle, I want to join the single currency – in practical terms, we have got to be sure that all the conditions are in the right place."
Membership in the near future?
While ruling out immediate euro zone membership, Brown’s statements marked the start of a major government push to reverse widespread public opposition to the euro. "Our view that membership in a successful single currency would be of benefit to the British people as well as to Europe is strengthened by the results of our assessment," Brown told the House of Commons on Monday.
On Tuesday, Prime Minister Tony Blair will hold a rare joint press conference with Chancellor Brown to launch a campaign to sell the benefits of the common currency to a nation hesitant to give up its economic autonomy.
But convincing the traditional euro-skeptical country of this will be difficult. Recent polls conducted at the beginning of June showed that 60 percent of the country opposed scrapping the pound, which they’ve had since the eighth century. Only 33 percent were in favor of the euro; the rest were undecided.
Many in business and industry who initially were in favor of introducing the euro back in 1997 are now less certain. They are watching the developments in the rest of Europe very closely and biding their time until conditions are just right.
Adair Turner, former head of the Confederation of British Industry and now vice president of Merril Lynch, told Deutsche Welle that many business leaders are in the "let’s wait and see camp or in the I don’t know, I still want to consider it camp."
"The number of people who are totally against the euro for all time has always been small. Most people who are in that camp are arguing on the basis of politics and not economics," said Turner.
Politics vs. Economics
For many political pundits, the overriding opposition to the euro is the real reason behind Brown’s opting to hold back. If it recommends joining the currency union, the British government will have to hold a referendum on euro membership. The vote will likely be a no, a result Blair’s Liberal Party cannot afford at this time.
"The fact is that Tony Blair has been forced to make the right decision for the wrong reason," said the strongly anti-euro Sun newspaper in its editorial on Monday.
Opposition party leaders have also criticized Blair and Brown’s decision to forego membership for the time being. Conservative Party leader, Iain Duncan Smith dismissed the economic arguments on BBC television: "The British people don’t want to enter, they know this is a political decision, and they know that the economic circumstances are peripheral to that decision."
"All they [Blair and Brown] are really trying to do is find a moment when they can win the referendum," Smith said.
Brown is said to be in favor of holding the referendum before the next general election, which has to be held by mid-2006 at the latest. During his speech before Parliament, he announced that a draft bill paving the way for the vote on the euro would be published in the fall.