One of the principal subjects of a meeting of economy and finance ministers today in Brussels will be Britain's convergence programme, a statement of how the country intends to come into line with other European economies in the medium term.
The meeting is being held against a background of rising tensions within the European exchange rate mechanism. Last week the French franc fell below Fr3.40 against the German mark, its lowest level for three months despite heavy Bank of France intervention.
The Chancellor, who faces criticism over Britain's reluctance to commit itself to a return to the ERM, may have to defend the numbers in its convergence plan against charges of over-optimism.
Britain's plan shows the country's fiscal deficit, as measured by the public sector borrowing requirement, widening to 8 per cent of GDP in 1993-94 before coming down to 3.75 per cent in 1997-1998. Some European ministers have complained that Britain is overestimating the impact of growth on the deficit. They want tougher measures to curb public spending.
British officials say the row centres on technical questions about the reason for the sudden deterioration in the fiscal deficit, and say the main reason is that GDP has shrunk and cyclical spending - on unemployment benefit, for instance - has increased. European officials, at a meeting of the EC's secretive monetary committee, charged that the main cause was a structural increase in spending.
The European disquiet at this is more than technical, however. European finance ministers are angry that Britain has uncoupled from the ERM, and believe London is pursuing beggar-my-neighbour policies.
They want a demonstration from Mr Clarke that he is committed to the timetable for economic and monetary union, which includes targets for inflation, budget deficits and public debt. They will also demonstrate that they will be tough with countries that disregard fiscal guidelines, a key aspect of preparing for a single currency.Reuse content