Single currency, double-speak

It is in Britain's urgent interests to know what the Prime Minister rea lly thinks about EMU

Across the land, alert British citizens may well have concluded that Her Majesty's Government has finally gone off its chump. Whatever the cause - funny mushrooms in the Treasury tagliatelle, perhaps - surely nothing but collective mental breakdow n could explain this manic enthusiasm to argue just now about the single European currency, which is years away.

This view, quite commonly held among MPs, too, is profoundly wrong. The rows and cavortings over monetary policy in recent days may have resembled a surreal comedy, but they have the makings of a much darker drama. Whether it would join a European singlecurrency is the biggest political and economic choice facing this Government - by far.

So let us ask a question so simple and so important that many clever ministers have been trying very hard to hide the answer: is the Government basically in favour, or basically against?

The official line, articulated by the Prime Minister a week ago and reinforced by Kenneth Clarke last night, is that it depends on what kind of single currency we are talking about. We don't know how many countries would be involved, or how tight the political control over the bank would be, or the state of our economies at the time.

In logic, this is absolutely fair. A single currency involving France, Germany and a few of the other strongest economies would be much more likely to work than one involving Italy, Spain, Greece and Portugal.

The latter would be trying to yoke together economies that were very different, and would need huge transfer payments to help ease the pain - payments that would themselves involve higher taxes on the richer areas and, almost certainly, more fraud in thepoorer ones. It would be unstable and dangerous. As Kenneth Clarke put it yesterday: "An ill-thought-out, ill-conceived monetary union would do Europe harm.''

The British opt-out allows this country to wait and see what kind of monetary union it will be, and whether it looks like working. As one minister put it: "We don't know yet whether it will be a disastrous re-run of the Gold Standard, or a benign revisiting of Bretton Woods.''

Waiting and seeing has a downside. It means we won't be in at the beginning and will be less influential in the kind of monetary union that results. City business might be lost to Frankfurt. But it is perfectly reasonable to argue that the bonus of not being aboard if the thing crashes is worth the penalties of delay.

That, then, is the position sketched out now by Major and by Clarke, and by the Foreign Office. It sounds unheroic but sensible and pragmatic - how could anyone in the Tory party, or indeed on the Continent, get seriously upset about it?

The trouble is that there is an entirely different view of the single currency also doing the Tory rounds. This view, articulated by the Chief Secretary Jonathan Aitken, and shared by Michael Portillo, Peter Lilley and many more, is that a single currency is wrong, period. It is inimical to national sovereignty and we should have nothing to do with it, whatever the economic circumstances, and whatever kind of monetary union is on offer.

On a strict reading of this view, it would be in Britain's interests for the whole project to fail. These ministers and the many Euro-phobe MPs on the Tory benches would be as strongly against a successful monetary union as against an unsuccessful one.

The merest whiff of that approach drives the French and Germans into a private fury - here, once again, is perfidious Albion joining a project only to try to wreck it. If the British don't intend to join, and are hostile to the single currency, then shouldn't they be shown the door at once?

Now, if Britain is to maintain any serious influence in the EU at all, it is utterly vital that the first position - being open-minded about the project, really willing, under certain conditions, to join - is the united view of the Government, and that the second position is marginalised. That second position is not merely a tougher version of the first; it is a refutation of it.

Most of the Cabinet are not covert saboteurs. Last night, Clarke argued that a single currency "could improve the efficiency of the single market ... could lead to stronger trade and investment links ... could - and I emphasise could - secure low inflation and lower and more stable interest rates ... We could all benefit...''

Clarke has been careful not to restate his personal support for a single currency, but that is because he doesn't want to further exacerbate party tensions. He has experienced no conversion to the Euro-sceptic cause.

Those positive arguments for the single currency - the four "coulds'' outlined above - were a broad wink at his own view. Indeed, I understand that in an earlier draft of the speech, the four coulds were four woulds.

But how open-minded is John Major? Are his sceptical words about the single currency meant to signal that he is politically opposed, a gut anti-monetary union man, or are they mere pragmatism? In terms of Britain's real interests, this matters a lot. Major has deliberately used the word "constitutional'' about a single currency, which in the ears of the Euro-phobes puts him on their side. Once you accept that giving up sterling is constitutional, you are implying a surrender of political power that (they argue) no Tory could contemplate. They want the Prime Minister to go a little further yet - they always do - but they are very happy.

Clarke, by contrast, pointed out that the link between independent monetary policy and sovereign statehood was "far too simplistic ... It is quite possible to have monetary union without political union. It is a mistake to believe that monetary union need be a huge step on the path to a federal Europe.''

Both Clarke and Major used similar language at times in their speeches. Clarke was careful to quote the Prime Minister and exceedingly keen to portray the two of them as united. But it is not at all obvious that they are.

Tony Blair put his finger on it at Prime Minister's Questions on Tuesday when he asked whether Major would be in favour of joining a single currency if all the economic conditions were met. Clarke, quite clearly, would be. But the Prime Minister couldn'tanswer; and while he can't, the Government can't, either.

Let us go back to the two forms of scepticism about the single currency, the genuinely open-minded form and the politically hostile form. It is in Britain's urgent interests for the rest of the EU - never mind the British people - to know which is reallyin John Major's mind. Does he want it to work? Or does he want it not to work? Does he hope for a successful monetary union that sterling can join? Or does he hope the question never arises?

These are theoretical questions, of course. But they are questions which go to the heart of this Government's attitude to the European Union. And it is deeply depressing that the response has been not to make the distinction clear, and choose, but to obfuscate and blur.