George voices strongest warning on single European currency

Eddie George, Governor of the Bank of England, last night delivered his strongest warning so far against launching the single European currency. The move would be fraught with risk if some member countries had not improved the flexibility of their jobs markets, he said.

"I am frankly nervous at the prospect of introducing the euro at a time of very high and very different rates of unemployment across Europe," Mr George said in the annual Mais lecture at City University.

The Governor, who is a long-standing if moderate sceptic about monetary union, warned that labour market reform must be an urgent priority for European governments. "We have to find answers to the urgent problem of European unemployment."

Mr George said economic policy had converged to a remarkable degree across Europe, with wide acceptance of the need for stable prices and budgetary discipline. There was a commitment across the political spectrum to macroeconomic stability as a necessary condition for the sustainable growth of output and employment, he said.

But stable macroeconomic policies were not enough, as illustrated by the fact that output had stagnated and unemployment risen inexorably.

Mr George said: "My concern is that the persistence of these wholly unacceptable levels of unemployment across Europe ... could begin to undermine public support for macroeconomic stability in some countries."