The UK and the Euro in 2003

This was further set back through 2003 due to the war in Iraq and the more importantly the Swedish referendum.2

Many regarded the Swedish referendum as a dress rehearsal for a later British referendum on the euro and so the result of the Swedish vote has left many pro – European campaigners in a state of disarray.

The Swedish vote on the euro produced a resounding victory against joining the euro with 56% of the Swedish electorate opting out of the euro in favour of keeping the Krona.3

After Swedish voters rejected the euro in the referendum, pro and anti-euro campaigners in the UK now both believe that the chances of a vote before the next election have all but disappeared. This scepticism was compacted by that that of Roman Prodi who when asked if Britain would still join the euro simply answered, “No, not now”.4

Coupled with the prime minister's waning popularity, as a result of the war in Iraq and the subsequent Hutton inquiry - many analysts claimed that he would be unlikely to risk an uphill campaign to win over sceptical Britons to the merits of euro membership.

Despite of this Mr Blair has remained defiant claiming:

"I don't see any point, irrespective of what happens in Sweden, of ruling anything out. Let's keep our options open. That's what we'll do."5

Earlier this year on June 9, 2003 Chancellor of the Exchequer Gordon Brown delivered to the House of Commons his assessment of the five economic tests and announced that they still had yet to be met. According to Mr Brown four of the five Treasury tests on the currency had still not been met, the one relating to financial services being the only one to get the chancellor's approval. But he did continue and suggested that progress had been made on passing two of the of the most important tests; on economic flexibility and convergence with the euro zone, which he commented would lead to the remaining two tests, impact on employment and the impact on financial services being satisfied.6 The chancellor did leave the door open for a referendum on the single currency in parliament, with a judgment to be made in next spring's Budget on whether sufficient progress has been made for a reassessment of the five tests.

In light of this UK policy on the Euro remains fundamentally unchanged.

In principle, the Government appears to be in favour of UK membership in the Economic and Monetary Union (EMU); in practice, the economic conditions must be right.

Blair and Brown have begun to unite and both have publicly supported the national changeover plan and believe that although the time is not right now, that when it is Britain will be successful in joining the euro, “yes but not yet".7

"Tony Blair and I will put the patriotic case for British engagement with Europe.”7 Declared Gordon Brown, but he was still quick to reassure sceptics that this does mean turning our backs on the US or losing all national sovereignty within Europe.

The determining factor underpinning any Government decision on membership in the single currency is the national economic interest and whether the economic case for joining is clear and unambiguous.

Euro-enthusiasts still see two big hurdles that still have to be overcome before the government can commit itself. The first is that the European Central Bank must begin a process of reform. The second hurdle is the weakness of the euro, which is itself tied in closely to the performance of the European economies. The Treasury believes that the pound is far too high and the chancellor is not prepared to talk or massage sterling down, and the Treasury does not share the view widely held in the City that the pound would fall sharply if a referendum were announced. Much therefore depends on how the European economies perform over the coming year.

It is clear that over the past 12 months the government have showed an increasing public commitment towards the euro and appear to be slowly moving towards announcing a British referendum on the euro, as can be seen as recently as this month (December 2003) when the government revealed its draft referendum bill,  ‘should Britain join the euro?’ The release of the bill is further suggestion that the governments campaign to join the euro may now be changing gear so that should the five economic tests be passed next year a referendum can take place, whether this takes place before the next election remains to be seen but the result of the Swedish referendum will undoubtedly delay the decision.

WORD COUNT: 1037