Although it would have been preferable if the French had not decided at the last moment to put forward as their own candidate Jean-Claude Trichet (who, it is now agreed, will start an eight-year term when Duisenberg steps down), if a deal had not been struck this weekend it would have been far worse for the euro's credibility. The pity is that despite Tony Blair's vital role in brokering the agreement, his government has decided not to join EMU in this parliament, except in exceptional circumstances.
Last week, the Treasury Select Committee, of which I am chairman, published the report The UK and Preparations for Stage Three of Economic and Monetary Union. As the Committee is divided in its views, with a substantial pro- euro majority but also a significant anti-euro majority, we did not discuss the pros and cons of entry nor the issue of timing - contrary to speculative accounts that appeared before the report was published and which have been repeated in The Independent and elsewhere. We did say that it would not be possible "to judge clearly and unanimously either the success of EMU or answers to all of the Chancellor's five tests for at least five years", but that led on to the next sentence: "It will remain the case that the UK's decision will have to be made on a political and economic assessment of the balance of national advantage."
What we are saying is that because there will be no certainties either about the success of EMU or the Chancellor's tests, our decision will have to be taken in the broad national interest, on the basis of a comparative political as well as economic analysis of the costs and benefits not only of participation but also of staying out.
In my view, the UK should join sooner rather than later - and probably sooner than the Government's present timetable. I predict that, from this weekend, events will move much faster than people think.
Pressures will build up to join, especially from business and particularly from those involved in finance and trade, which will increasingly deal in euros. Pilkingtons told the committee that it was converting its systems to use the euro because that will help eliminate differences in production costs. ICI said that euro liquidity will spread through the economy. Siemens told us that the euro would come through the back door. Siemens and British Steel have made it clear that they are anxious for UK suppliers to use the euro. Sainsbury's and Marks and Spencer have both announced that they will accept euros from 2002. In the report we strongly backed the national changeover plan from sterling to euros, announced by the Chancellor, so that business can not only proceed quickly and efficiently once the decision is taken for the UK to join but also so that they can start planning now.
Several witnesses argued that outside EMU the exchange rate is likely to be even more volatile. We have already seen the impact of uncertainties about the start of EMU leading to a strengthening of the pound, to industry's cost. However, once the euro is up and running, there could be an almost equally unsettling sharp depreciation in the value of the pound. British business, like its continental counterparts, prefer stability. From 1 January 1999, business in 11 member states will gain from having a single currency, while British companies may live in an even more unstable environment than now.
The political consequences of exclusion from EMU cannot be ignored. The Labour government has made a good start with its more positive European policy. But it will be far more difficult to play a leadership role now that we have excluded ourselves, at least for the time being, from Europe's most important project, one which will develop further in the next few years. For the moment, the Government has managed to ensure that the informal Euro X committee confines itself to internal EMU issues. But, in the longer term, the UK's self imposed exclusion from the real powerhouse of the union will carry political costs.
Economic and monetary union will only bring with it big economic benefits, but it will also bring the peoples of Europe closer together. The UK should join as soon as possible, not just to minimise the disadvantage of not being in the first wave but, more positively, to help make it a success.
The Government should speed up preparations to join, including informing the British public about EMU and the advantages of joining sooner rather than later. At the moment, the majority are not only sceptical but also ignorant about EMU. The sooner a powerful information campaign starts the better. We in the European Movement will play our full part but the country needs a strong lead from government, as well.
The final say about this momentous decision, of course, remains with the people, and it is certainly true that the cost of an unsuccessful yes campaign will be very high. But the sooner the Government begins to prepare the British electorate for entry, the more likely it is to win the referendum. It could be to our lasting national disadvantage to put off the decision for too long.
Giles Radice is chairman of the Treasury Select Committee and of the European Movement.Reuse content