Britain's acceptance of the euro depends more on Rupert Murdoch's newspaper than Gordon Brown
If Prime Minister Tony Blair is serious about persuading voters to swap the pound for the euro, he must convince Sun proprietor Rupert Murdoch to end the UK newspaper's loathing of the common currency.
Newspapers both reflect public opinion and help to shape it. After the 1997 election, Murdoch's tabloid newspaper made the front-page claim that it was 'the Sun Wot Won It' by backing Blair and helping to convince the nation that Labour could be trusted after almost two decades with the Conservatives in charge.
Getting Murdoch and the Sun to back the euro would be a big help in persuading the electorate to vote in favour of the common currency. Blair has said he'll decide in the next two years whether to hold a referendum, leaving plenty of time to come up with an inducement for Murdoch to back his policy on Europe, and for the Sun to change course without alienating its readers.
The Sun hasn't always been opposed to closer links with Continental Europe. 'Yes for a future together, no for a future alone'' was the slogan it used 26 years ago urging its readers to vote in favour of staying in the Common Market, a free trade zone that preceded Economic and Monetary Union. The Government of the day won that referendum, taking just eight months to turn a 61-to-39 balance wanting to exit the union into a 67-to-33 vote in favour of staying in on June 5, 1975.
Polls show about 60% of voters are currently opposed to replacing the pound. A key feature of that Common Market referendum more than two decades ago was the support of all of Britain's major newspapers for the Government's pro-Europe stance; if the Government can get the press on board for a campaign in favour of euro adoption, it'll be easier to overcome that opposition.
So what might Blair be able to offer Murdoch in exchange for a change of direction at the Sun?
Analysts expect the Labour Party to tackle the issue of media ownership and regulation in a communications bill in the coming parliamentary sessions. Murdoch's company News owns 38% of British Sky Broadcasting. The Government could trade concessions in the communications bill for support from Murdoch's stable of British newspapers on the euro.
Even if Blair can somehow buy the Sun's support, British membership of the common currency is a long way off. What's been happening in the currency market since the election, however, gives the impression that the UK is poised to start building sterling bonfires and crank up the printing presses to mint euros.
Investors and traders have driven the pound to a 16-year low of $1.3682 on the mistaken rationale that Labour election victory amounts to a resounding endorsement of joining the euro, which in turn would require a lower sterling value to protect British exports.
William Hague's resignation as opposition party leader is another red herring that's given traders an excuse to drive the pound lower. Because the Conservative party's election tactic of trying to turn the election into a vote on keeping the pound backfired, some people are wrongly interpreting Hague's demise as helping to ease the path to the common currency.
'A damaged Hague in situ made the road to Emu much smoother,'' said Alison Cottrell, European policy analyst at UBS Warburg. 'Having a candidate at the head of opposition who is from the eurosceptic side, which looks probable, but who is more popular than Hague and rebuilds Conservative Party morale makes efforts by the re-elected Government to promote its euro agenda more difficult.'' The euro issue has dominated the newspaper front pages since the election ended. While the media is convinced that Chancellor Brown is at best lukewarm toward the common currency, he's likely to back Blair when it comes to the crunch. Blair, meantime, isn't daft enough to pursue a referendum if polls continue to show the public is in favour of keeping the pound.
There's also a school of thought suggesting the prospect of a referendum is more useful to Labour than actually holding one.
Because the Conservative Party is split over the desirability of closer links with Europe, a referendum provides a handy stick for the opposition to beat itself up with. On that view, Blair will avoid a referendum during this term of office, telling his European partners more time is needed for Britain's economy to get in sync with the euro-region, and wait for a third election victory to ask voters the euro question.
For the true test of whether Blair will seriously attempt to steer Britain in the next four or five years into agreeing to accept the euro, how Labour treats Murdoch is a much better guide than who Blair appoints to his cabinet, or whether Brown's speeches warm to Europe.
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