UK pressed by Commission to rejoin ERM

BRUSSELS yesterday stepped up the pressure on Britain to rejoin Europe's Exchange Rate Mechanism, highlighting the pound's volatility as the sole impediment to UK membership of the euro.

Asked about the UK position, Yves-Thibault de Silguy, Monetary Affairs Commissioner, reminded the British government that, of the five criteria for membership of the single currency, "one of them is ERM".

After issuing a statement praising most aspects of UK economic performance, Mr de Silguy told a press conference: "If and when the UK decides to join the euro it will have to comply with the same conditions as those complied with by the first wave countries." These include sticking to the "margins set out in the ERM," he added.

The Commission statement came in response to the "convergence programme" in which the Treasury outlined how policy would match targets for euro membership. Highlighting worries on exchange-rate fluctuations, Brussels called on the UK to "continue with its stability-oriented framework for macro-economic policy with a view to achieving exchange-rate stability".

It held back from a formal plea to the UK to join the ERM in deference to the British single currency opt-out. By contrast, the Commission said Sweden, the only other EU nation neither in the euro nor the ERM, was expected to join "in due course".

Nevertheless, Mr de Silguy's reminder will embarrass the Government, which knows that re-entering the ERM would be politically explosive. In September 1992, sterling crashed out of the mechanism, undermining the credibility of John Major's administration.

While Tony Blair's government appears anxious to prepare British public opinion for euro entry, Gordon Brown, the Chancellor, has denied any intention to rejoin the ERM. Under the Maastricht Treaty, membership of the ERM for two years is a precondition of entry into monetary union. Since the euro's debut, the mechanism has been replaced by "ERM2", launched with Denmark and Greece as members.

Yesterday Alan Donnelly, leader of the European Parliamentary Labour Party, joined the debate, arguing that the treaty refers to the original ERM, not ERM2, and hence Britain would not be barred from joining immediately after a referendum. He added: "Those who say there is a treaty requirement to join ERM2 are simply wrong. If the fundamental economics are right, membership or otherwise becomes an irrelevance."

Although the 11 member states are unlikely to hold Britain to the letter of the Maastricht Treaty's two-year stipulation, a prolonged period of exchange-rate stability would almost certainly be demanded.

That will be a problem for the Chancellor, and could force him to shadow the euro even if he escapes the full ERM membership provisions. Otherwise Brussels gave the UK a good bill of health, approving "realistic" projections of public finances being close to balance by 2002 and highlighting the rising level of government investment as a share of GDP.

Outlook, page 17

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
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

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links