Parliament & Politics: PM warns of difficult times ahead

ECONOMY

TONY BLAIR renewed his warning of difficult times ahead for the country yesterday as an independent forecast predicted a deepening manufacturing recession next year.

But the Prime Minister rejected demands by Liberal Democrats to enter the single currency so that interest rates would be brought closer to lower European levels, saying: "If we hold our nerve and stay hold to the policies we set out, that is the best chance for this country to come through the next 12 months".

During Question Time, Malcolm Bruce, the Liberal Democrat Treasury spokesman, blamed failure of policy for the Treasury survey's gloomy forecast on the manufacturing industry.

Edward Davey, the Liberal Democrat MP for Kingston and Surbiton, added: "... you told the City that you found economic stability `sexy'. Do you realise that British business would find you rather more sexy if you stopped flirting with Europe and made up your mind on the euro?"

Replying, Mr Blair joked that he believed in "a sustained period of wooing before relationships are entered into".