How to have your EMU cake and eat it

City & Business

The Markets are plainly taking it seriously, even if nobody else is. The FT's story that the Cabinet is about to commit itself to taking Britain into European monetary union soon after the official start date of 1999 sent the pound tumbling against the German mark on Friday. Long bond yields also eased in anticipation of an early move to join monetary union, while equities soared. If an unattributed article in a pink newspaper can do this for the markets, just think what effect the real thing would have.

The markets must make their own judgement on the truth of the FT's story, but there seems a fair possibility that they are being hoodwinked here. Let me put it in a different way. Is the Government really preparing for a fundamental shift in policy on EMU, or is this just a presentational change, an attempt by ministers to sound positive as Britain prepares to take up the EU presidency next year while actually not altering their underlying position one jot?

In other words, is this not all about obtaining some of the political and economic benefits of EMU while, for the moment at least, remaining outside it? Being seen as part of the inner circle in Europe, even if not really in it, is plainly a highly desirable thing if reaction on Friday is anything to go by. Continental politicians welcomed the apparent change in tack with open arms. The economic effect was better still - a more competitive exchange rate against the mark and the franc and lower government borrowing costs as bond yields drop down to German and French levels. Whoever spun that story to the FT must have been delighted with the result.

In his column for The Independent, Gavyn Davies, chief economist at Goldman Sachs, has been musing for some months now on how the Government might achieve this presentational shift. One suggestion is to call an early referendum which would empower the Prime Minister to take us into EMU if he thought the circumstances right. The signal thus sent to markets and to Europe would be that the British people wanted to be part of it. On the other hand, there would be no commitment.

Another approach would be for the Government to say it would back entry into EMU once circumstances were right. In reality, this is probably not so very different to saying, "We won't enter until the conditions are right" - broadly the Government's position to date - but in presentational terms it seems a lot more positive.

The trouble is that the FT article actually went rather further than this to suggest a government commitment to entry at the earliest opportunity. Indeed many market operators saw the story as part of a deliberate softening up for the possible announcement of Britain's entry in the first wave.

This strikes me as the most unlikely of all possibilities. Admittedly this is a new government, and it is quite possible that the electorate feels less strongly about EMU these days, that people would indeed be prepared to vote for it in a referendum. But would any political leader in their right mind really want to take us back into a fixed-exchange- rate mechanism so soon after our catastrophic experience with the ERM? New government or not, this seems implausible. Practically, it would also be very difficult to enter in the first wave. The Bank of England, though now independent, is not independent enough for Maastricht. Though we satisfy most of the Maastricht convergence criteria, there is one crucial area in which we fail - currency stability. The pound has been many things since it was ignominiously kicked out of the ERM, but stable it has not been.

I've also got my doubts about whether the Government would really want to commit to a referendum on EMU so soon after being elected. Tony Blair has long said he wants to see convergence not just in the public finances and inflation rates of member states but also in their labour and capital markets, and on a whole host of other measures too, before deciding it is safe to join. All this would argue in favour of the Chancellor again fudging it when he makes his long expected statement towards the end of the year. It will sound a lot more positive about Europe's grand design, it may even say that we will enter at an early opportunity, but I would be amazed if it went further. Whether that will be enough to justify the ecstatic reaction of markets on Friday is anyone's guess.

Mr Levi goes for goal

DID ANYONE notice in Saturday's newspapers that English National Investment Company, a little known investment trust with net assets at the last count of just pounds 15.2m, has bought AEK, one of Greece's leading football clubs? No probably not, for this was a comparatively small deal - just pounds 5m - and even if a football fanatic, you are unlikely to follow the fortunes of AEK. All the same, the transaction seems worthy of some attention, if only because it is the first in a promised string of leisure/sport/entertainment acquisitions from ENI.

The plan is to grow this company into a major enterprise comprising a range of different branded leisure and media interests. To that end, ENI raised some pounds 50m of new equity capital in the City last week. The whole thing is the brainchild of a bright young 35-year-old called Daniel Levi. He's determined to hit the big time. If all this sounds a bit reminiscent of Andrew Regan and Lanica Trust, there are plenty of reasons for believing it is actually very different.

Mr Levi is the prodigy of Joe Lewis, the Bahamas-based billionaire and the largest shareholder in ENI. Already Mr Levi has assembled a quite impressive management team around him as well as involving some impressive backers, including Richemont, the Swiss-based cigarettes and luxury goods group. If the strategy of small acquisitions in the leisure and entertainment industry sounds a little unfocused, there does seem to be some sound thinking behind it all. AEK is a case in point. A top club for pounds 5m would be unthinkable in Britain these days. In many other countries, however, the revenue-earning potential of football is still not yet properly appreciated.

Mr Levi may find it harder to generate value out of these businesses than he thinks. Others have tried and failed. But his attempt looks worth following and we'll certainly be hearing a lot more of him over the next few years.

Start your day with The Independent, sign up for daily news emails
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
Sport
footballShirt then goes on sale on Gumtree
Voices
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Arts and Entertainment
The sight of a bucking bronco in the shape of a pink penis was too much for Hollywood actor and gay rights supporter Martin Sheen, prompting him to boycott a scene in the TV series Grace and Frankie
tv
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine