CBI wants single currency later

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Business leaders yesterday called on the Government to commit Britain to entering a single currency when economic conditions were right but not to join in the first wave of monetary union in 1999.

The call from the Confederation of British Industry came as its members gave overwhelming backing to monetary union as being in the best interests of the UK but only once there had been sufficient convergence in the economic performance of member states.

The employers' organisation also said there was a strong case for delaying a single currency by one or two years but conceded that this was unlikely to happen for political reasons.

The "contingent yes" to EMU, as it was described by the CBI's director- general Adair Turner, reconciles the view of those industrialists who were urging immediate entry and those who supported membership of EMU in principle but only when the fiscal conditions were in place to make it successful.

After a four month consultation process 94 per cent of the CBI's members voted for one of these two positions and only 6 per cent urged outright rejection of EMU.

But Mr Adair said Britain should not participate until there was sustainable fiscal convergence, a clear commitment that the proposed European central bank would have price stability as its main priority and greater flexibility across Europe's labour markets.

Even if the conditions were in place by 1999 to make EMU a success, the CBI said it could not support early entry because Britain would be faced with interest rates that were too low to control its buoyant economy and prevent a resurgence of inflation.

Sir Colin Marshall, president of the CBI, said this was one of the most important decisions Britain had had to face in his lifetime and therefore the CBI had to come off the fence. "The CBI has sent a clear message to Government. It should declare strong support for UK membership of EMU under the right conditions and take steps to ensure that the necessary practical preparations are under way to make entry possible."

Sir Colin said that when the CBI saw the Prime Minister a week ago to outline its position on a single currency, it had come away with the impression that Mr Blair found it "reasonably acceptable".

However the Chancellor, Gordon Brown, told MPs yesterday that there were "formidable obstacles" to Britain joining the single currency. These included the need for the business cycle to be moving in harmony with other European countries, and the likely impact of EMU on jobs.

Speaking to the Treasury Select Committee, Mr Brown said: "I think as far as EMU is concerned, our policy is right - that we keep the options open, but we make the tests not simply the Maastricht tests, which we actually pass in all respects, but also economic tests about the sustainability of convergence."

He added: "It is right to have a debate on these matters."