Britain to Trade Pound for Euros
After declaring Britain will join the single EU currency after 2002, the government must win public support.
Britain is setting course to join a single European currency - but plans to take its time on the journey.Skip to next paragraph
Subscribe Today to the Monitor
Chancellor of the Exchequer Gordon Brown signaled the future ditching of the pound sterling in a major parliamentary announcement Oct. 27. But although he committed Britain to joining the single currency, Mr. Brown ruled out membership by the European Union's 1999 target date.
Instead, he promised to line up with big business in a campaign to persuade the British electorate to embrace the euro - the currency Europe is set to adopt - soon after 2002.
Britain's next general election will probably be held that year.
In another important policy switch, Brown pledged that Britain would do what it could to help other European Union (EU) members intending to join the Economic and Monetary Union (EMU) in the near future. Led by Germany, several EU countries, including France and Italy, are planning to adopt the euro in 1999.
The reason for what political analysts see as the Labour government's waiting game is twofold: Brown, with backing from Prime Minister Tony Blair, told the House of Commons that Britain would not "reach economic convergence" with EU states planning to adopt the euro in the 1999 first wave. British interest rates are currently 7 percent, whereas in most continental European countries they are around 3 percent.
"If, in the end, a single currency is successful, and the economic case is clear and unambiguous, then the government believes Britain should be part of it," Brown told the Commons.
Secondly, Brown did not mention a formidable political obstacle: convincing the British public that consigning the pound to history is in the national interest.
Most opinion polls still show a majority of British voters oppose monetary union. This is giving Britain's Conservative opposition, which has pledged not to take the country into EMU for at least 10 years, grounds to attack the government.
Peter Lilley, the Conservative shadow chancellor, told the Commons Brown's statement was "a death sentence for the pound."
Conditional though they are, the government's declared intentions bring to an end more than a decade of doubt about Britain's long-term future in Europe.
Former prime ministers Margaret Thatcher and John Major opposed EMU, claiming that British sovereignty would be eroded. Their policy was to "wait and see" whether Britain should join.
In his Commons speech Brown declared, "If EMU works economically, it is worth doing," he said.
British analysts, however are divided.
Writing in the London Times, Peter Riddell saw Brown's speech as "the most pro-European statement by any senior minister for a very long time."
Professor Tim Congden, a leading economic analyst, says it may be 10 years before Britain adopts a single currency. "In the meantime, the entire enterprise could fail, and Britain would then have no reason to join."