It would take more than good results in Brown's five economic tests to convince sceptics the time is right
Around about now the British cabinet will be getting Chancellor Gordon Brown's verdict on whether the five economic tests for UK membership have been met. We all know, of course, that he thinks they have not, or at least not yet. By 9 June, he has to tell the nation. But that is the easy part. Is the No a 'No, never' or just a 'Not for now' No? Who, in the end, will determine the answer, a few erudite experts in the Treasury or the masses informed chiefly by the tabloids?
Theoretically, there are many financial and economic advantages to membership of the eurozone, both for institutions and individuals. But it is not difficult to find things to worry about. For a start, the European Central Bank is clearly not a patch on our own stately Bank of England, recently voted top of the pops in a central bankers poll. But competence in a monetary authority is no guarantee of immortality, as the once formidable German Bundesbank found out.
Second, there is open scepticism over the European Growth and Stability Pact, the eurocratic solution to keeping high-spending governments in check. It has already been tested by Italy, Germany, France and Ireland, and found wanting. Although most governments approve of measures to control budget deficits, when action is needed, who is prepared to cast the first stone? These are huge economic issues and public tests, and the results are disappointing.
There is also a disturbing complacency regarding the Eurozone's rather mediocre economic performance. Each quarter, officials from one country or another confidently predict a resurgence of economic growth, and each time they overestimate. Even in the boom times, they were wrong, perhaps because there is no agreement on how to calculate key indicators. Almost as frequently, we hear pledges on economic reform, and these too never quite deliver.
The smugness has become entrenched as the euro has strengthened but the fact is the eurozone has done nothing to deserve its buoyant currency. Any gain is entirely due to the frightening twin deficits being run up in the US. Like a weak and vain manager, the euro bloc likes to take credit where it is not due and is quick to blame others for its shortcomings. Until now, it has not been polite to say so.
At the interface of economics and politics, there is friction, to put it mildly. The 12 eurozone members are increasingly resentful that non-members Britain, Sweden and Denmark still sit in on all the big meetings and help shape policy they don't have to follow. Those who are not in, they feel, should be booted out. Such a hard line bodes ill for future co-operation, especially when the 12 become 25 with new members joining from Central Europe.
For the eurozone core, the agenda has already moved on from a single currency to a single state, to be created by a re-drafted European constitution. Current outsiders may be able to sell the former but they need to distance themselves from the latter, otherwise neither will be achieved.
Even if the Chancellor's five economic tests are passed with flying colours, it will still be a tough sell to the Great British Public, who are going to cast their vote, if and when they get it, on the basis of their experience of French holiday resorts, fears of federal taxation, hearsay about growing pension liabilities and a generous dollop of sentiment lying somewhere between prejudice and conviction.
Marcus Brookes appointed CIO
In association with Professional Adviser
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