Britain “moving closer to the Euro”? Don’t get too excited…

Article published on Dec. 23, 2008
Article published on Dec. 23, 2008

The global financial and economic crisis has helped revive the once fervent debate on Britain and the Euro. But, as the British pound falls to record lows against the Euro, is Britain really set to follow the other euro opt-out EU Member State, Denmark, and move closer towards joining the euro?

(Photo: Charles Morgan)

In recent years, the focus of European debate in Britain has been on EU constitutional treaty and its successor, the Lisbon treaty. The once fiery debate on British Euro entry effectively came to a halt in 2003 when Gordon Brown, then Chancellor of the Exchequer (finance minister), concluded that, whilst euro membership was in Britain’s long-term interests, his five economic tests for joining had yet to be met. Since then, Labour quietly dropped the issue.

Renewed euro debate?

Five years on, and the financial crisis and economic downturn have led some commentators and academics on both sides to pick up the debate again. Some euro-enthusiasts laud the Euro as a safehaven in a global economic storm. Economist Will Hutton argues that seeking to join the euro now is “beginning to look a very attractive escape route” from Britain’s worst-case scenario of bankruptcy and economic stagnation.

Meanwhile, Eurosceptics argue that the crisis demonstrates Britain was right not to have joined and being outside the eurozone makes Britain better equiped to steer its economy through the difficult period. __ “Britain moving closer to the Euro” __ Last month, comments made by EC President, José Manuel Barroso energised this largely small academic debate into a mini political storm. Talking on French radio, he said that Britain was closer to joining than ever before, and “some British politicians ” had told him that “'If we had the euro, we would have been better off'”.

 Back in the UK, his remarks sparked speculation that the Brown government was suddenly considering euro membership, and led one Eurosceptic newspaper to make it frontpage headline news, exclaiming “Secret plot to join Euro”.

With swift Labour government denials and Tory Eurosceptic opposition jibes at Labour “euro-fanatics”, is there really much to get excited about? Is Britain really “moving closer to the Euro”? Leaving the economics aside, the answer is surely no.

Lack of political will

There is no British political will for euro-membership anytime soon. It could be said that enthusiasm has actually diminished in recent months. Last September, the Liberal Democrats, historically the most pro-European of the three main parties, distanced itself from any rapid adoption of the euro soon.

This comes as no surprise with public opinion still against and a general election expected in 2009/2010.

Despite making a recovery in the polls, Labour is still behind the Eurosceptic Conservatives and things could get worse for them as the recession starts to bite. With his political future far from safe, Gordon Brown is therefore unlikely to be willing to risk his premiership on an issue that he has hardly been enthusiastic for in the past. __ Political jousting? __ As Barroso refused to reveal to whom he was referring, most suspected his former colleague at the European Commission, Peter Mandelson (and the Europhile British foreign minister, David Miliband).

Brought back in the government from Brussels by Brown last October to help Labour win the next election, Mr Mandelson (now a Lord, but still just “Mandy” for some) has often never been far from political controversy. He has previously had to resign from his Cabinet twice due to political scandals.

Responding to the speculation, Mandelson denied it was him and rejected any euro talk, telling the BBC that "My view is that the government is right to maintain a long-term policy objective of taking Britain into the euro, but it's not for now."

If Lord Mandelson had hoped his statement would provoke the Eurosceptic Tories (particularly his new political adversary of late, Conservative Shadow Chancellor George Osborne), he was not disappointed. Days later, Mr Osborne attacked Labour “Euro-fanatics” for seizing “on our economic difficulties for their own ideological ends”.

 Following the Deripaska affair, could this be really no more than just another round of political jousting? Politically weakened in his last spar with the ‘Prince of Darkness’, Mr Osborne also robustly reaffirmed the Tories’ Eurosceptic stance, pledging never join the euro – not “in the present or the future” – which no doubt helped improve his standing in the party.

So, as the Euro celebrates its tenth anniversary on January 1st 2009, don’t expect to see Britain joining Denmark and Iceland in the queue to join the single currency any time soon!

by Charles Morgan