Parliamentary: MONETARY UNION: Maude claims Brown wants to join ERM

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The Independent Online
THE CHANCELLOR, Gordon Brown, was accused of want- ing to take Britain back into the exchange-rate mechanism yesterday when Tories claimed he was dodging the question of whether he planned to shadow the euro.

But Mr Brown made clear during Question Time that, under the Amsterdam treaty, entry into the ERM before joining the single currency was voluntary. "We have no intention of rejoining the ERM," he said.

Francis Maude, the shadow Chancellor, said exchange-rate stability was necessary for two years before Britain could enter the single currency.

That would require a change of the remit of the Bank of England's Monetary Policy Committee because it would have to pursue interest rates in line with the 11 countries presently in the currency union.

Mr Maude said stringent measures to achieve convergence were necessary now if the Government intended to join the euro soon after the next general election, probably in 2002.

Quoting an article by Gavyn Davies, a senior adviser to Mr Brown and a partner at Goldman Sachs, Mr Maude said: "Mr Davies said at some point the Bank of England will have to be told to shadow the euro instead of inflation for a two-year period to stabilise exchange rates ahead of joining. Do you agree with that."

The Chancellor, replying, attacked the Tories for being "obsessed" with the ERM because of the debacle on Black Monday 1993 when Britain was forced out of the mechanism.

"When you were at the Treasury as a minister, your government took us in and we had to leave ignominiously as a result of your mistakes," he told Mr Maude.

Mr Brown said he had outlined the five convergence criteria in 1997 and he would not join the single currency unless it was in the British national interest to do so.

In a briefing to parliamentary journalists, Mr Maude later attacked the Chancellor and accused him of "ducking a key question.

"The condition for entry to have exchange-rate stability is there for very good reasons. For Britain to join the euro without our economy being aligned with the Continent would be disastrous both for Britain and the euro area.

"That is why there is a treaty obligation to shadow the euro for two years."

The uncertainty surrounding Mr Brown's policy could potentially destroy the credibility of the Bank's anti-inflationary policy, Mr Maude added.

"So either Gordon Brown thinks this stability will occur by magic, or he is hiding his true intention to force the pound to shadow the euro. If this is what he intends to do he should say so and spell out the consequences.

"He should tell us whether he is intending to direct his whole economic policy to abolishing the pound," he said.