Pound surges on caution over UK entry into euro
Wednesday 23 June 1999
Stephen Byers, the Secretary of State for Trade and Industry, insisted Britain would not "drift" into the single currency and that the UK's economy was strong enough to maintain an independent currency. The pound surged on his comments, which came as a leading member of the Bank of England's Monetary Policy Committee said he did not believe the pound would depreciate.
Mr Byers said in a TV interview it would be 2001 "at the earliest" before Britain was likely to meet the economic tests for UK entry to the single currency. "We're a few years yet off joining the single currency," he said.
Later, Mr Byers said it would be very difficult to win the referendum that the Government has promised to hold before committing the UK to euro membership. Mr Byers said the euro had had a "rocky start" despite expectations that it would be a strong currency.
"Given Britain is the fifth biggest economy in the world, there should be no question of Britain drifting into the single currency. We are strong enough to have our own currency and so there will be a genuine decision, which the British people will have if there is a referendum on joining the single currency."
Although government spokesmen insist there has been no change in policy, the currency markets have reacted to nuances indicating a distinct cooling- off since the dismal European election results earlier this month.
Mr Byers' remarks were the most specific so far from a senior minister on the timetable for Britain's euro referendum.
Professor Willem Buiter, an MPC member, said the continued strength of the pound was "inexplicable" and that there was little hope it would fall back over the short term.
"We have this continued strength of the pound which, while volatile, has remained at a level that defies rational explanation. It is inexplicable. There are no good reasons for anticipating any short-term dramatic decline," he said.
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