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UK: Government unity strained by Emu
TUESDAY OCTOBER 21 1997By Robert Peston and David Wighton
The government's unity came under strain yesterday after weekend briefings by advisers to Gordon Brown, the chancellor, that he plans to rule out sterling's membership of a European single currency for the five-year lifetime of the parliament.
There were also signs that Tony Blair's close relationship with leading businessmen was at risk, as several rang ministers to complain about uncertainty over policy towards European monetary union.
A company director close to the Labour leadership said he understood Downing Street's switchboard had been "swamped" with calls from anxious executives.
A minister said Mr Blair had been surprised by weekend press reports that Mr Brown planned to tell the Commons that no decision on joining would be made until after the general election.
"The chancellor told the prime minister he had to end speculation that the two of them were divided over Emu," said the minister. "He said he wanted to do this with an interview with The Times, but the outcome was something of a surprise."
The minister added that he would be extremely surprised if Mr Brown's statement to the Commons on Emu, due within four weeks, would be categoric on deferring an Emu decision until after the next election.
However, there were also signs that Mr Brown's apparent new position was not nearly as hostile to the single currency as it was widely interpreted to be.
His statement to MPs may include a commitment to strive to create the conditions for sterling to join shortly after the general election, around 2002, a colleague said.
But in order to secure entry by the deadline, when notes and coins in circulation would be converted into Euros as an important final stage in monetary union, he needed a few years of calm, without incessant press speculation on timing of entry.
Mr Brown hinted at this strategy at the launch of the Stock Exchange's electronic trading system. "Britain will need a period of stability without continuing speculation while Britain endeavours to meet the five economic tests [for membership]," he said.
Yesterday sterling rose nearly 3 pfennigs against the D-Mark to close at DM2.88 in London, almost reversing the fall of three weeks ago when the Financial Times reported that the government was looking more favourably on Emu. Shares fell sharply at the opening but the FTSE 100 index closed 60.1 points lower, a fall of 1.1 per cent, having been 118 down at one stage.
Labour supporter Chris Haskins, the chairman of Northern Foods, urged the government to back entry in principle and leave open the option of joining before the end of the parliament.
© Copyright the Financial Times Limited 1997
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