Test for tests
The evidence on the euro
matters more than the speeches
The Times, Leading article, November 06,
2001
The Prime Minister sought to reassure the CBI yesterday about both the evolution of the war on terrorism and the prospects for the British economy. He was forceful on both counts. But, in stark contrast to the momentary public evangelism on the euro demonstrated in his speech to the Labour Party conference five weeks ago, he went no further than a restatement of existing policy.
In this respect he did not differ from Gordon Brown, except that the Chancellor chose, wisely, to place more weight on the need for meaningful economic reform in the EU before the Cabinet decided whether or not to recommend the single currency to the country. As matters stand, Labour can still claim to have one stance on the euro, coupled with multiple interpretations.
Tony Blair told his business audience in Birmingham that “provided the assessment is positive, we will make the case to the British people in a referendum”. This positive result is, however, as Mr Brown concedes, far from a foregone conclusion. The Treasury is in the early stages of what is described as “preliminary and technical” preparations for an analysis of the costs and benefits of the single currency. A favourable recommendation would then rest on a “clear and unambiguous” conclusion.
As the weighty tome released by Business for Sterling and New Europe yesterday — The Economic Case against the Euro — indicates, the data available now show that the chance of an assessment reaching the view that this condition had been satisfied is minimal.
The superficial advantages of exchange rate stability within the EU itself (although not for other trading partners) would come at the price of more volatility in employment, growth, inflation and real interest rates. If there were such an item as a “boom and bust index” then the vulnerability of the economy to swings in fortune would increase by 75 per cent.
As Professor Charles Goodhart, a former member of the Monetary Policy Committee and now an adviser to the Governor of the Bank of England, observes: “It is highly desirable to have both sides of the economic argument about euro entry put urgently and forcefully. This paper is highly effective for the ‘no’ side.”
Those who favour the euro must prove beyond all reasonable doubt that the five tests have been met; their opponents, under the agreed formulation, have to demonstrate only that this high hurdle has not been vaulted.
For all the speeches and the spin both now and over the next 18 months, the evidence makes its own case against the euro.
