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Euro: the pieces come together.

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Introduction

Euro: the pieces come together WHY did he do it? Why, at a time when everybody was concerned with other matters, did Tony Blair suddenly put euro entry back on the political agenda last week? And should we now be preparing for an early referendum? The post-September 11 reality means, "round the world, nations are instinctively drawing together", according to the prime minister. Therefore, we should think more seriously about drawing together with our European partners and join the euro. Taken to its logical conclusion, the argument appears to be that the terrorists - who he insists will not achieve anything - have made the argument for joining the single currency more compelling. I would not, of course, accuse the prime minister of anything so crass. A couple of things appear to have prompted Blair's decision to speak up on the euro. One was that there was a strong suggestion going round, just a week or so ago, that euro entry had been kicked into the very long grass. The government in general, it was said, and the Treasury in particular, had plenty of other things to worry about than the euro. ...read more.

Middle

Because of America's woes, that might be starting to happen. There is also, of course, the political dimension. Four months on from a landslide election victory, Blair is lord of all he surveys, his position strengthened rather than weakened. Those worries about delaying the election until the autumn because of foot and mouth look to have been misplaced. The Tories, faced with a huge rebuilding exercise, remain, in the public mind, the embodiment of the anti-euro case. As long as this persists, a referendum will be winnable. Will we get one? Contrary to some reports, Gordon Brown was not thrown into deep gloom by Blair's reviving of the euro issue. On the morning of the speech, Jonathan Powell, the prime minister's chief of staff, rang Ed Balls, Brown's right-hand man and chief economic adviser, to clear the relevant passage. The chancellor had no problem with it as long as it emphasised the primacy of his five economic tests. That does not mean the two share the same view on the euro. Brown thinks entry would be highly problematical unless any referendum was won by a decisive margin. ...read more.

Conclusion

The CBI's distributive-trades survey showed that in September retailers enjoyed their best month since October 1996. New car registrations for the month, at 443,265, were up by 25% on a year earlier. Some slowdown is inevitable in the coming months, and it already seems to be happening in the housing market. But it is hard to square these figures with the idea of a collapse in consumer confidence or, as some economists said three weeks ago, that spending would immediately grind to a halt. Some economists think that because consumer spending has been so strong the Bank of England should not have cut interest rates much, if at all, this year. That seems to me plain wrong. Apart from the fact that we do not know what would have happened to spending in the absence of the cuts, the Bank's monetary policy committee decided well before September 11 that to maintain growth at a time of weaker world growth it would need consumer spending to remain strong. It could, in other words, put its worries about imbalances in the economy to one side. It did so again last week, reducing interest rates to 4.5%. These are uncertain times and business confidence is dire but, in the light of the Bank's actions, a recession in Britain remains highly unlikely. ...read more.

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