Brussels, 10/06/2003 (Agence Europe) - On Monday the UK's Chancellor of the Exchequer, Gordon Brown, said that the UK was not ready to join the single currency yet, but said a referendum would be held on the issue (without setting a date) and offering europhiles the prospect of structural reform to adapt the UK's economy to eurozone economies over a relatively short timespan.
Speaking to a packed House of Commons, Brown said the UK economy was not yet sufficiently in line with those of the eurozone Member States to be able to live comfortably with the euro, adding that structural difficulties remained that were a risk to stability. Only one of the five economic tests he had set had been fully met - the competitiveness of financial services. Two other tests had not been met at all, namely convergence of economic cycles and the UK economy's flexibility with regard to the eurozone. In terms of British and foreign investment in the UK; and the growth, stability and employment; Brown said everything hung on sustainable convergence and flexibility. He highlighted the significant advantages for the UK of joining the euro, namely increasing trade with the eurozone (of up to 50% in thirty years) which could lead to GDP rising from 5% to 9% over the same timespan.
Brown announced a series of reforms which should lead to significant progress next year. In the autumn, measures will be unveiled to reform the UK's housing market (currently mortgages tend to be short-term and at variable exchange rates) by introducing fixed rate and long-term loans like in the EU. London will use the harmonised European consumer price index for measuring inflation, as used by the European Central Bank and the Treasury will revise its 2.5% inflation target down in line with the ECB's target of 2%.
Brown also announced a bill this autumn on a referendum. The government will reassess the financial situation in the spring of next year and will then decide whether a new assessment of the five tests would be appropriate ahead of potentially holding a referendum.
Commission hails ongoing debate on joining euro
In a press release, the European Commission welcomed the "ongoing debate in the UK about euro membership", which it "follows with interest". "The report on the five Treasury economic tests" .. is a demonstration that the merits of membership continue to be part of the UK European and economic policy agenda. The "five tests" are part of this domestic debate. The Commission does not, in consequence, propose to comment on the analysis" explains the Commission, adding however that the "UK has an "opt out" and therefore no obligation to join the euro under the current Treaty".
The current President of Eurogroup and the ECOFIN Council, Greek finance minister Nikos Christodoulakis, said on Monday (a few hours before the British government's announcement): "As President of the Eurogroup I believe that the participation of the UK in the euro area will be beneficial both to the UK and the euro area as a whole." He also said "the group was confident the UK government would do its best to join when economic conditions allow it". The German finance minister hoped the UK would one day join the single currency but said he completely understood the UK's decision not to hold a referendum just yet.
Reaction of British MEPs
British Liberal Democrat Andrew Duff said the UK's euro decision "merely strengthens the sense of Britain's isolation in Europe. Tony Blair has four more days to find his way back into Europe" by making a positive contribution to the Convention on the Future of Europe. "So far, Britain's performance in the Convention has been lamentable" said Duff, adding that "the UK must drop its ridiculous plot to create a super-president of the European Council that would challenge and probably subvert the Commission" and "the UK must put aside its political hostility to installing the Charter of Fundamental Rights at the heart of European unification". Another Liberal Democrat, Nicholas Clegg, said Blair and Brown "dramatically underestimate the cumulative effects on the British economy and on British influence in Europe of yet more procrastination on the euro". The President of the Liberal Group, Graham Watson, said the UK government should have the political courage to call a referendum next year. Watson insisted, "the Chancellor says that the British economy is not flexible enough - in fact it's the Chancellor who is not flexible enough" (to join the euro).