Politics: Treasury highlights `e-day' cash crisis

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The Independent Online
THE WITHDRAWAL of pounds 25bn in notes and 100,000 tonnes of sterling coins currently in circulation would be required if Britain joined the European single currency, MPs were told yesterday.

A Commons memo on the practical plans for a euro changeover - already dubbed e-day by the Treasury - said that 1 January "would not be a suitable date for the introduction of euro notes and coin - a date in mid-February would be better, following the example of decimalisation.

"Most firms, consumers and employees would prefer a rapid changeover, to minimise the costs of handling two currencies. However, reducing the legal period of dual circulation to less than six months might cause public anxiety, particularly among special needs groups and the elderly."

But the memorandum, from the Treasury to the Commons Treasury Committee, then added: "The logistics would include withdrawing 100,000 tonnes of sterling coins and distributing 70,000 tonnes of euro coins, and switching pounds 25bn of notes - with all the security implications that that would entail."

The memo also said: "Steps to prepare for the introduction of euro notes and coins include: encouraging the public to bank or spend hoarded sterling stock in advance of e-day; encouraging employers to move to automated pay systems ahead of e-day; and pensions, benefits and other payments by national, regional and local authorities to be made in euro from e- day." Final plans for the changeover, the memo added, would have to wait for a decision to join - and Gordon Brown, the Chancellor of the Exchequer, has already said "that such a decision would probably not take place until after the next election".

But John Redwood, the Tory trade and industry spokesman, warned last night that a single currency would lead to a single government - making general elections "pointless".

Mr Brown will be pressed to amplify his views about possible British entry into the single currency when he faces questions from the Treasury Committee today.

The MPs are likely to press him on whether the pound will need to rejoin the Exchange Rate Mechanism in order to qualify.

In addition, the Chancellor will be asked whether he agrees with Eddie George, the newly-reappointed Governor of the Bank of England, that some of the probable first-wave members are unlikely to have achieved real economic convergence by the start of next year.

Prompted by questioning by the Treasury committee when he gave evidence on Emu recently, Mr George said that in his personal view the economies of some countries, such as Italy, Spain and even France, had not converged in a sustainable way. Asked specifically whether they should qualify, he replied: "I have serious doubts about that."

Some City pundits had speculated that Mr George's scepticism - which he describes as "Euro-pragmatism" - had been a reason for Mr Brown, more of a Euro-enthusiast, delaying the Governor's reappointment.