Bank 'will have to follow euro policy'

THE European Union's top monetary official will use his first speech to the City this week to warn that the Bank of England will be obliged to follow the monetary policy of the future European Central Bank - whether it likes it or not.

Yves-Thibault de Silguy is to deliver a lecture to the London International Financial Futures and Options Exchange (Liffe) on Thursday. Although the Finance Commissioner will not urge the UK to join the single currency immediately, he hopes to warn it of the pitfalls of delaying too long. Mr de Silguy argues that once the other EU countries enter into monetary union, the European Central Bank - the institution that will take over monetary policy for the "euro-zone" - will have a dominant influence in all 15 EU countries, including those that do not adopt the euro in the first wave next year.

In an interview with the Independent on Sunday, Mr de Silguy said this "will certainly affect monetary conditions in the UK without the UK being able to participate in decision making."

The idea is that financial markets will see Britain as a kind of "satellite" state of the countries in the euro-zone, because so much UK trade - around 60 per cent - is carried out in the EU. If the Bank of England wants to keep sterling stable to ensure smooth trade flows, it will be obliged to follow the interest-rate movements of the ECB.

Mr de Silguy dismissed the suggestion that the Bank might want to encourage divergencies in its currency to increase exports to the continent. "The UK is a well run economy that doesn't go in for competitive devaluations of its currency which would decrease the overall wealth of the country," he said.

The majority of EU countries, including France and Germany, are planning to adopt the euro on 1 January 1999. The British Government has said it will not join the single currency until after the next general election, which could be as late as May 2002. The Prime Minister, Tony Blair, has not ruled out holding a referendum on joining the single currency before then, although it seems most likely he will take the issue to the electorate after the election.

"I think attitudes (in Britain) will become more favourable very quickly once the euro becomes a reality. From that point on, the disadvantages of not being in the euro will quickly become apparent," Mr de Silguy said.

The Gaullist commissioner will also warn that non-EU companies wanting to invest in Europe will avoid the UK because it is not a member of the single currency.

In addition, British companies will be at a competitive disadvantage to their continental rivals because they will face an exchange rate when trading with the continent.

The EU heads of state are due to agree on 2 May which countries have met the Maastricht criteria on inflation, debt levels, budget deficit as a proportion of gross domestic product, and exchange rates - therefore enabling them to adopt the euro. Greece is the only country unlikely to be accepted. Denmark, Sweden and the UK have all decided not to join in the first round.

Around 70 per cent of Liffe's transactions are currently carried out in currencies that are likely to convert to the euro. "From 1 January 1999, most of the City's work will be done in euros, even if the UK is not in the single currency. The City will be the big trading place for the euro," Mr de Silguy said.

Club legend Paul Scholes is scared United could disappear into 'the wilderness'
A model of a Neanderthal man on display at the National Museum of Prehistory in Dordogne, France
Dawkins: 'There’s a very interesting reason why a prince could not turn into a frog – it's statistically too improbable'
newsThat's Richard Dawkins on babies with Down Syndrome
Arts and Entertainment
Eye of the beholder? 'Concrete lasagne' Preston bus station
architectureWhich monstrosities should be nominated for the Dead Prize?
ebooksAn evocation of the conflict through the eyes of those who lived through it
Dinosaurs Unleashed at the Eden Project
Arts and Entertainment
Life and Style
This month marks the 20th anniversary of the first online sale
techDespite a host of other online auction sites and fierce competition from Amazon, eBay is still the most popular e-commerce site in the UK
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Quantitative Analyst (Financial Services, Graduate, SQL, VBA)

£45000 per annum: Harrington Starr: Quantitative Analyst (Financial Services, ...

Application Support Engineer (C++, .NET, VB, Perl, Bash, SQL)

Negotiable: Harrington Starr: Application Support Engineer (C++, .NET, VB, Per...

AIFMD Business Analyst / Consultant - Investment Management

£450 - £600 per day: Harrington Starr: AIFMD Business Analyst / Consultant - I...

Business Analyst Solvency II SME (Pillar 1, 2 & 3) Insurance

£450 - £600 per day: Harrington Starr: Business Analyst Solvency II SME (Pilla...

Day In a Page

Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

eBay's enduring appeal

The online auction site is still the UK's most popular e-commerce site
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

Magic circles: Artist Olafur Eliasson

Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

Greggs gives lesson in crisis management

After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

Matthew McConaughey sings the praises of bumbags

Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
7 best quadcopters and drones

Flying fun: 7 best quadcopters and drones

From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
Joey Barton: ‘I’ve been guilty of getting a bit irate’

Joey Barton: ‘I’ve been guilty of getting a bit irate’

The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
Andy Murray: I quit while I’m ahead too often

Andy Murray: I quit while I’m ahead too often

British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home