Hague burns bridges in tirade against euro

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The Independent Online
WILLIAM HAGUE yet again hardened his opposition to a European single currency, suggesting that Britain's economic cycle might "never" get into gear with the rest of Europe.

But in a speech that drew upon every conceivable argument against the currency, the Conservative leader also warned that the euro could whip up the same kind of "full-blown banking and financial crisis" that had hit South East Asia.

"Don't let anyone tell you that it couldn't happen here," Mr Hague told a conference of the Federation of Small Businesses at Kenilworth, Warwickshire. "Few people foresaw the collapse of the Asian tigers."

Mr Hague also gave notice that the Conservatives will oppose the Working Families Tax Credit, which is designed to ease the poverty and unemployment traps, and provide help for parents with childcare costs, when it is fully introduced in April 2000.

The credit offers working families a guaranteed income of at least pounds 180 a week, with full-time earnings of pounds 100, and will ensure that families earning less than pounds 220 a week - half the average male earnings - will pay no income tax.

But it was the section of his speech on the single currency that will cause the greatest tensions within his own party, with pro-Europeans fearing yet more Tory warfare on the eve of next year's European parliamentary elections.

Mr Hague repeated the formula that the Tories would oppose joining the single currency before and at the next election - an effective ten-year embargo - but he went on to suggest such strenuous hostility that he appeared to be burning all bridges.

Opening the euro section of his speech with an attack on the policies of both Margaret Thatcher and John Major, he said: "The best policy for small business is a sound policy for the economy that avoids unsustainable booms, which inevitably cause deep recession. There is no question that the last Government got it wrong in the late-1980s and early-1990s."

With Nigel Lawson as Chancellor, they had shadowed the German mark; with Mr Major, they had joined the Exchange Rate Mechanism.

"Never again do I want to apologise for failing businesses, high interest rates and soaring unemployment because we joined a European political project when the time was not right," Mr Hague said.

As for the question of whether it would ever be right for Britain to join the single currency - "the ERM set in stone", with no escape route - Mr Hague again suggested the word "never". He said that far and away the most important condition of suitability for entry was "that our economic cycle should be the same as Europe's. This has not happened in the last 25 years. It is quite possible that it never will ...

"But unless it is met, the euro could lead to huge booms and deep recession. For us in Britain it could make the ERM look like economic bliss because the euro could lead to prolonged and deep recession with no exit."

He said the fundamental weakness of the euro was that it had a one-size interest rate, that could not be varied to suit the different conditions of different member states.

"The same interest rate needed to coax Germany and France out of recession is the interest rate to curb a boom elsewhere. With the euro, the only option left to rein in a runaway economy is massive tax increases.

"If Britain joined a single currency, huge tax increases might be required at some point to stop the economy spinning out of control," he said.

And in a clear lock on his own future room for manoeuvre, Mr Hague added: "It is extraordinary that given Britain's uniformly unhappy experience of fixed exchange rates, that the Government now wants to join the most extreme form of fixed exchange rate ever invented."

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