Eddie George warns on EMU suitability of France and Italy

The Governor of the Bank of England yesterday voiced 'serious doubts' about whether France and Italy should be allowed to join European Monetary Union. His warning came as the European Commission urged Britain to set a clear timetable for signing up to the single currency. Diane Coyle, Economics Editor, and Katherine Butler listened to the arguments.

Eddie George, Governor of the Bank of England, said high levels of unemployment in some EU countries threw the economic sustainability of the single currency into doubt.

"Wide divergences in unemployment rates pose a real question as the sustainability in the absence of much more flexibility in labour markets in Europe," he said, speaking before the Treasury Select Committee yesterday.

Pressed as to whether all 11 countries expected to join in the first wave should be allowed to, the Governor said: "I'm saying I have reservations about that." And asked specifically whether France, Italy and Spain, all with high jobless rates, should qualify he said: "I have serious doubts about it; but that's a judgement the heads of state will have to make when they meet in May."

If a ''wide'' EMU went ahead, Mr George said he expected there would be pressures for taxpayers in one member state to subsidise others in order to relieve unemployment. And there could also be pressure for restrictions on trade with countries both outside the EU and inside.

"The more countries you have, the greater the risk of this sort of thing happening," the Governor said. "There will be a great temptation for people to seek short-term solutions, to seek to ease the unemployment problems with short-term palliatives."

These would not solve the underlying structural problems, but, the Governor noted: "The unemployed don't care whether they are unemployed for structural reasons or for cyclical reasons. They just want a job."

Mr George has often expressed his concerns about whether the formal requirements for membership guaranteed genuine economic convergence, especially in the jobs market. But he was unusually outspoken yesterday in expressing the view that certain countries should not be allowed to go ahead.

However, Mr George firmly denied the charge of Euroscepticism. "In principle I'm not against the thing at all. I'm very pro-Europe. I'm pragmatic about the single currency."

Some MPs on the Committee were so staggered by the Governor's forthrightness they inferred he must be demob happy, and not about to be reappointed to a second term by Gordon Brown. But the expectation is that the Chancellor will keep Mr George in the job, with an announcement likely in the next week or so. Treasury sources painted his responses as the natural caution of a central banker.

Brussels turned up the heat on Britain over the single currency last night, after Mr George spoke, warning of serious political and economic consequences if the UK stays out of monetary union.

Jacques Santer, the European Commission President, used a lecture at the Guildhall in London to remind Tony Blair that his stated desire to become one of the EU's leaders will come to nothing if Britain remains aloof from EMU. "Long-term aspirations to shape the European Union," he said, "will not be helped if the United Kingdom remains outside the Euro zone for long."

In a separate speech, also delivered to a British audience at Brunel University last night, Sir Leon Brittan, the Commission's vice-president, went even further to urge a clear timetable for Britain's entry to EMU by at least 2002 when euro notes and coins enter circulation.

"Waiting and seeing may or may not have its political attractions but it is not a cost-free option," he warned.

Last night's speeches mark the start of a sustained effort by the Commission to pressurise the Government into a definite timetable for Britain's membership of EMU. Next week the monetary affairs commissioner Yves Thibault de Silguy will take up the running when he travels to London for talks with the Prime Minister and Chancellor.

In his comments, Mr George stressed the importance for the UK of continuing with practical steps to prepare for the euro, saying the Chancellor's working party would be publishing within the next year a national "changeover plan".

Giles Radice, chairman of the Treasury Committee, told Mr George that it proposed to hold confirmation hearings for future appointees to the Bank of England's Monetary Policy Committee. Although an attempt to incorporate this formally into the Bank of England Bill failed, Select Committees have wide powers to call witnesses.

Start your day with The Independent, sign up for daily news emails
footballHe started just four months ago
Nigel Farage celebrates with a pint after early local election results in the Hoy and Helmet pub in South Benfleet in Essex
peopleHe has shaped British politics 'for good or ill'
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Sink the Pink's 2013 New Year's Eve party
musicFour of Britain's top DJs give their verdict on how to party into 2015
Arts and Entertainment
(L-R) Amanda Peet as Tina Morris, Melanie Lynskey as Michelle Pierson, Abby Ryder Fortson as Sophie Pierson, Mark Duplass as Brett Pierson and Steve Zissis as Alex Pappas in Togetherness
TV First US networks like HBO shook up drama - now it's comedy's turn
Pool with a view: the mMarina Bay Sands in Singapore
travel From Haiti and Alaska to Namibia and Iceland
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect