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Analysis: Irony in euro decision
By CNN European Political Editor Robin Oakley
LONDON, England (CNN) -- There's a certain irony in Monday's decision by Britain to hold off joining the euro for now. Britain's opposition Conservatives -- then led by William Hague -- made their anti-euro "Save the Pound" campaign the centerpiece of their 2001 election strategy. They were ridiculed by Tony Blair for doing so, but the New Labour prime minister and his finance minister, Gordon Brown, are now doing the job for them. On Monday, Brown -- Britain's chancellor of the exchequer -- told MPs in the House of Commons that the time was not yet right for Britain to join the single currency. Politicians and financial markets will comb the small print of his announcement and will scrutinize Brown and Blair's body language for clues as to when they do intend to make the leap. "In principle, I want to join the single currency, in practical terms we have got to be sure that all the conditions are in the right place," Brown told the BBC Sunday. The New Labour government is committed to taking Britain into the euro. It has insisted that it will do so when five economic tests are met. The tests cover the degree of convergence of the UK and eurozone economies; their flexibility in coping with shocks; the effect on UK growth and jobs of euro entry; the effect on financial services; and the effect on inward investment. But most UK lawmakers believe that the crucial test is one of political will, and that a government facing opinion polls with a 2:1 verdict against the euro won't take the political risk of recommending entry -- particularly with Blair and Brown at odds over euro strategy. Although Brown left open the door to reviewing the five economic tests next year, there is little prospect of Britain joining the single currency during the lifetime of the current Parliament. To the relief of the eurosceptics, the pound now appears to be safe until at least the next election -- which must be held in 2006 and is more likely to take place a year earlier. That will undoubtedly frustrate Blair, who has long wanted to be the man to take Britain into the euro. He told last year's Labour Party conference: "The way to get the right answers is by being in there, vigorous, confident, leading in Europe, not limping along several paces behind. That's why the euro is not just about our economy but our destiny." There is no use, says Blair, in being a "half-hearted" member of the EU. He knows that the eurozone countries are exerting more and more control over the European economy and want to formalize their power to take more decisions. So long as the UK stays out of Europe's biggest project so far, Blair is aware, it is hard for him to live up to his strong pro-European rhetoric. And taking Britain in would have helped patch up some of the differences sparked by the war in Iraq. Blair, who dominates British politics, is unable to enforce his will because, say commentators, he effectively conceded a veto long ago to his finance minister. Brown stepped aside to give Blair a clear run at the party leader's job nine years ago and was handed a strong measure of control over domestic policy as his part of the deal. Peter Riddell, columnist for The Times of London, told CNN: "Abroad Tony Blair looks supreme. But at home on domestic policy, Gordon Brown, the chancellor of the exchequer, is in charge of big areas of policy. "They say in government there are 'Tony's things' and 'Gordon's things'. And the euro is half of one and half of the other." Brown, who hopes to succeed Blair as party leader and prime minister -- and who would not be keen to see Labour's political fortunes switch into reverse as a result of a defeat over the euro -- is insisting Britain isn't ready for the euro.
The result, experts predict, is that Europe will lose trust in Blair. "Just a couple of years ago a lot of European nations thought Tony Blair was indeed the strongest European leader," Katinka Barysch of the Centre for European Reform told CNN. "He is now just seen as a national leader and his credibility in Europe is of course going to suffer." Brown does not want to jeopardize his domestic economic record. Britain's economy will grow about 1.9 percent this year, almost twice as fast as the eurozone economy. If Blair does not succeed in persuading Brown, his authority will be badly dented. Blair fears the loss of influence in the European Union if Britain stays out of the euro. Britain, Denmark and Sweden are the only three countries in the 15-nation EU that have stuck with their own currencies since the euro's launch in 1999. "What's important here is not necessarily the timing, as in saying they will have the referendum this year or next year," said Barysch. "It is the commitment that the European countries would like to see, because they are getting really tired of Britain blowing hot and cold on the euro and on the European Union in general."
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