Sir Leon Brittan yesterday warned that the single European market could be at risk without the present drive to create a monetary union. "EMU is now more than ever likely to happen," he said.
The vice-president of the European Commission was responding to the question that John Major, the Prime Minister, raised earlier this week about the impact on the single market of a move towards monetary union that created a division between those inside and outside it.
Sir Leon said that "even the present degree of progress towards EMU does and will continue to act as an important glue in the single market".
Without it, "the strain on the single market could well become very serious indeed".
Sir Leon, who was speaking at a conference in London organised by the Federal Trust, was referring to calls from French, German and Austrian industry for compensation against European exchange rate fluctuations. The Commission, he said, was able to reject these calls with ease "only because there is an accepted macroeconomic framework in Europe, in the form of the convergence criteria included in the Maastricht Treaty, which ensures that all member states are pulling in the same direction".
Sir Leon said that other European countries would deem Britain "crazy" if a decision were taken to rule out a single currency in the lifetime of the next Parliament.
That would "only have one certain effect, and that is to ensure that Britain loses any further influence over the process of setting up EMU".
Sir Leon's concern was shared by Richard Freeman, the chief economist at ICI.
If Britain did not join the first wave of countries forming EMU, he said, the difficulties in eventually catching up with core countries might "prove insurmountable and at great costs to British industry and UK welfare".
Sir Leon rejected as completely overblown the Euro-sceptic argument that EMU was the thin end of a very large wedge that would end up with a European superstate running a European budget, relegating the UK to the status of a region of a United Europe.
However, speaking at the same conference, Otmar Issing, the chief economist of the German Bundesbank, said that the attempt to create a monetary union without a political union was unprecedented. There was no example in history of a lasting monetary union that was not also a state entity.
Dr Issing warned that the removal of exchange rate risk would make it more attractive for member states of a monetary union to borrow.
A new agreement was necessary between those countries embarking on EMU to enforce fiscal prudence.
He contrasted the tight restrictions on eligibility for EMU with the lenient "excessive deficits" provision of the Maastricht Treaty.