‘Fatal’ to delay euro vote, top German warns Blair

Date: 22/05/03

By Martin Banks

THE German chairwoman of the European Parliament's economic and monetary affairs committee has intervened in the debate over whether Britain should join the euro, urging UK premier Tony Blair to hold a referendum on the issue "as soon as possible".

Socialist Christa Randzio-Plath, a highly influential voice in Brussels, said UK entry was clearly "politically desirable".

Failure to hold a referendum during the course of the present British parliament, which could run until 2006, would be "politically fatal" both for the UK and the European Union, she warned.

"It would be a clear gain for the eurozone and Britain itself if the UK were to join. More than ever, the question arises as to whether Britain wants an EU or a free-trade zone," said the MEP.

Gordon Brown, the UK's chancellor of the exchequer, has set five economic tests to determine whether a "clear and unambiguous case" can be made for membership of the single currency. These are:

• 'Sustainable convergence' between Britain and the eurozone;
• sufficient flexibility to cope with economic change;
• the effect on investment;
• the impact on the financial services industry, and;
• whether the euro is good for employment.

Randzio-Plath argues that the case for euro membership has been proved beyond doubt.

Firstly, she claims there has been a "dramatic" convergence in the economies of Britain and the eurozone. "Long-term interest rates and inflation are broadly similar. Property prices, which have always been used as an argument against joining the euro, have stabilised."

Secondly, the eurozone offers a "flexible and positive" environment for investment. "Britain has been successful in reducing unemployment.

"The euro will not jeopardize this but, rather, will secure it," says the MEP.

Thirdly, joining the euro would make the UK more attractive for foreign investment. "Since the introduction of the euro, Britain's share of foreign investment in the EU has fallen from 28 to 5," she points out.

Fourthly, the City of London financial market would gain by the removal of exchange rates and full participation in the financial internal market.

Finally, joining the euro, she says, would boost competition, innovation and growth in both Britain and the rest of the EU.

However, there is no sign that Brown will listen to such arguments. On the basis of 2,000 pages of analysis produced by his treasury department, he reportedly believes the conditions are not yet right for Britain to join the euro.

The chancellor made his position clear in a speech to the Confederation of British Industry on Tuesday, declaring: "We reject those who would urge us to join irrespective of the rigorous assessment of the five tests.

"If, based on the five tests assessment, the economics are right we should join. If the economics are not right, we should not."

However, any finding against the euro could put him at odds with Prime Minister Tony Blair and the majority of his cabinet, who are in favour of at least keeping the door open for a referendum during the current parliament.

The full cabinet will examine the treasury's findings this weekend, with the aim of reaching a consensus before Brown delivers the government's official assessment on the euro on Monday, 9 June.

Christa Randzio-Plath, the chairwoman of the European Parliament;s economic and monetary affairs committee has called on UK Prime Minister, Tony Blair, to hold a referendum on UK entry to the single European currency as soon as possible.