Blair turns the screw on Europe

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Tony Blair has put another lock on British entry into a European single currency. If a Blair cabinet believed that people would not vote for the currency in a referendum, it would not attempt to join up.

The hardened Labour line on the single currency could add to Mr Major's problems on Europe at a time when Conservative divisions are said to be going down badly with the electorate.

As the election moves into the final week of one of the longest campaigns ever staged, John Major is expected to play up the charge that Labour will increase taxes, and is not to be trusted on Europe, while Mr Blair will play to Labour's strengths on education and health.

With all the polls - and former minister Edwina Currie - suggesting a Labour landslide, Mr Blair's big problem could be the battle against over- confidence and complacency, and he yesterday appealed to the voters to turn out on Thursday to ensure the Tories did not get a fifth term in office.

The first indication of Mr Blair's new condition on a single currency was delivered in a BBC Question Time interview with the Labour leader last week.

After he had repeated that it was "highly unlikely" that a Labour government would participate in the first wave of a single currency, Mr Blair was asked whether that was for economic reasons.

"For economic reasons and also for reasons to do with politics as well," he said. A Labour leadership source said it was a matter of common sense that the question would not be put to the voters, if they were certain to reject it.

The Government's position is that the Government will decide on economic terms alone. Mr Major told ITV's Jonathan Dimbleby programme yesterday: "I don't believe it is wise to go ahead unless you are absolutely copper- bottomed certain, not only that the [economic] convergence criteria are met, but that they are sustainable."

Mr Major also rejected a call from the International Monetary Fund that European Union nations should commit themselves to the January 1999 date for a single currency.

Replying to a weekend warning from the IMF that most of Europe was now ready for Economic and Monetary Union and any delay could lead to turmoil in financial markets, Mr Major said: "Some people say it should go ahead in 1999 without knowing the economic circumstances, without knowing what it will mean, without knowing what a catastrophic impact it would have if it went wrong ... I think it is highly unlikely that it can safely - I emphasise the word safely - go ahead in 1999."

Mr Major contradicted the IMF view that most of Europe was already well on the way to fulfilling the conditions laid down under the Maastricht criteria for EMU membership, saying it was "extremely unlikely" that other member states would meet the convergence criteria by 1999.

"To go ahead without knowing the details, without proper convergence and knowing convergence would continue, would be madness beyond belief."

He also dashed hopes expressed by the IMF that EU states would make an early decision on fixing exchange rates to head off financial instability in the run-up to monetary union.

IMF officials speaking in Washington ahead of the meeting of the Group of Seven top industrial nations yesterday warned that markets would be unsettled by failure to complete EMU on time. Massimo Russo, special adviser on EMU to IMF managing director Michel Camdessus, said: "We at the IMF believe a delay ... would lead to substantial dangers."

IMF economic forecasts published last week showed all EU countries except Greece were now close to fulfilling the convergence criteria, Mr Russo claimed. But another IMF official warned that there would be financial instability without the early announcement of a plan to fix exchange rates ahead of monetary union. Jacques Artus, deputy director of the IMF's European Department, said: "You can't leave the market without any information whatsoever. Then it would be chaos." Among the options being considered by Brussels are using rates derived from the European Exchange Rate Mech- anism, which Britain left in 1992, or an average of market rates over a period of time.

IMF forecasts for Germany, France and Italy all show a deficit on their public finances equivalent to 3.3 per cent of gross domestic product in 1997, just outside the 3 per cent limit laid down under Maastricht.

But Mr Russo said it did not matter whether countries cut their public deficits precisely to 3 per cent of GDP. "I don't believe 3.1 per cent makes the euro weak and 2.9 per cent makes the euro strong," he said.

Dollar set to climb, page 22

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