Courtaulds boss queries EMU viability

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The Independent Online
Gordon Campbell, chief executive of chemicals company Courtaulds, has added his voice to a small but growing number of UK businessmen casting doubt on the feasibility of European monetary union.

Campbell said EMU without political integration is a recipe for disaster. He warned that if Britain joined at the wrong exchange rate, the country's industrial base would collapse within a few years.

Multinational companies such as Courtaulds are seen as gaining from the move to a single currency because of the savings they will make on the currency costs of cross-border business. But Mr Campbell believes the whole project could fall apart and cause irreparable long-term damage if as planned, it goes ahead on 1 January 1999 without a common pan-European political system first.

"In the absence of political union, the social tensions that will be created mean in the end that it will probably have to be unravelled," he said. "If the debate was really open and intellectually sound, it would be about simple political union and personally I would vote for that."

With regard to the separate issue of whether the UK should join monetary union, Mr Campbell said, "I don't see how we'll ever meet the convergence criteria with exchange rates and interest rates aligned with those in Europe."

Courtaulds does one third of its business in continental Europe compared with 17 per cent in the UK and 50 per cent worldwide. The company last week said it lost pounds 16m in the first half of 1997 because of the strength of the pound. A strong pound depresses foreign currency earnings translated into sterling.

Mr Campbell said he doubted that EMU would make life easier for European businessmen. He predicted increased volatility between the euro and the dollar, and said this volatility would offset the gains from no intra- European currency movements.

He said if Britain does decide to join, it has to make sure the rate at which it locks in to the single currency is right. "If we go in at the wrong rate it will lead to the de-industrialisation of Britain," he warned. "It is not like the European Exchange Rate Mechanism. Once you are in, that's it. There is no safety valve."

Until now, most press attention has gone to business leaders who support monetary union, such as Unilever's chief executive, Niall Fitzgerald, and Richard Sykes, chairman of Glaxo Welcome. Those who have openly attacked the project, such as Stanley Kalms, Dixon's chief executive, and Lord Hanson have done so out of raw opposition to greater political integration of Europe.

The Confederation of British Industry said Britain should join if it meets the convergence criteria on debt, inflation, interest rates and exchange rates as agreed in the Maastricht Treaty. "My scepticism is they won't ever be met," said Mr Campbell.