[A-List] UK eurozone membership: City heat

[Michael Keaney]

No 10 seeks to soothe City on euro 'rift'

Michael White, political editor
Tuesday December 3, 2002
The Guardian

Downing Street yesterday slapped down claims that Gordon Brown's hostility
to British membership of the eurozone will make the promised referendum a
virtual impossibility while he remains chancellor.

As the prime minister's official spokesman denounced as "ludicrous"
suggestions that last week's pre-budget report revealed the depth of the
chancellor's scepticism, Roger Liddle, No 10 adviser on European affairs to
Tony Blair, moved to reassure a meeting of executives and central bankers in
London that they need not fear a British drift away from Europe.

"Britain's economic future is inextricably linked to Europe. It's obvious
that Europe's single market is Britain's home market - any failure to
achieve Europe's potential reduces Britain's potential," Mr Liddle, an ally
of Peter Mandelson, told the European finance convention in the City.

"The picture isn't uniformly bleak: quite a lot of European economies have
done rather well," he said citing Sweden, Finland, the Netherlands and
Ireland - in contrast to Mr Brown's gloomier overall assessment last week.

"It's easy to be short-termist and despairing about this and to look at the
current difficulties and say it hasn't worked. There are still a lot of
factors driving reform - the euro is one," said Mr Liddle.

Though reports of the Brown-Blair rift have been exaggerated in recent days,
Tory leader Iain Duncan Smith seized on renewed uncertainties to attack Mr
Brown. "The iron chancellor has got metal fatigue," he said in a speech to
the CBI last night.

No 10 had earlier said Mr Brown's paper on economic management had been
directed at developing countries which met in Delhi last month, though many
analysts felt his message was directly primarily at the European Central
Bank.

"Should the economic conditions be met, we will recommend joining" the euro
zone, a government spokesman told the daily No 10 press briefing. "Policy is
policy and it hasn't changed." A verdict on Mr Brown's five tests of
euro-membership remains due by June 7.

But Mr Duncan Smith claimed the cracks were starting to show in the
government's claims to have created a stable growth-orientated regime.
Accusing Mr Brown of being "a false idol", he said £47bn worth of extra
taxes had been placed on business since 1997 - as well as ever-tighter
regulation.

"The government's approach to business contradicts its approach to public
services. And its approach to public services perpetuates its destructive
approach to business."

The reason for growing failure was that the chancellor "simply doesn't
understand how business works", said Mr Duncan Smith. He echoed CBI
complaints that the Treasury has steadily undermined the Tory economic
legacy since 1997, pledging huge spending increases based on "a buoyant
economy and thriving business sector" which is being undermined.