Economic and Monetary Union (Hansard, 12 February 1998)

§ 9. Mr. Wilkinson
If he will raise for discussion in ECOFIN the likely compliance by other countries in the EU with the Maastricht treaty conditions for entry into stage three of economic and monetary union. [27209]

§ Mr. Gordon Brown
In May this year, ECOFIN will assess, on the basis of reports by the Commission and the European Monetary Institute, whether each member state fulfils the necessary conditions for the adoption of the single currency. The Economic and Finance Ministers will then recommend their findings to the Council meeting in the form of the Heads of State or Government and decisions will then be made.

§ Mr. Wilkinson
Will the Chancellor of the Exchequer, as chairman of ECOFIN, recommend that all those countries which have the political aspiration to participate in the single currency should do so, in the interests of wider European unity; or will he insist that the strict stipulations of the treaty on European Union be met and thereby exclude Belgium and Italy, which have a level of national debt twice that permitted under the Maastricht treaty rules?

§ Mr. Brown
What we shall do is follow the procedures that have been laid down, which means that in March we shall receive reports from the Commission and the European Monetary Institute; those reports will then be discussed and a decision will be made on 1 May; and that will be reported to the European Parliament the next day for a final decision by the Council. We shall wait for the reports before making our recommendations and we shall chair the meetings in the orderly way that is required.

§ Mr. Sheldon
Is my right hon. Friend aware that, in any institution, it is the decisions taken in the first few months or year of that institution which determine much of what happens subsequently? Given that the decisions in question are so important and that we are out of many of them, how does he suggest we might reduce the problems of the danger to our economy?

§ Mr. Brown
We have set clear objectives for the British economy. Although we are in principle in favour of economic and monetary union, we have set five economic tests that must be met. Those tests involve looking at what is to happen to employment, financial services, industrial investment, convergence and flexibility and adaptability of labour markets to enable the single currency to work. Those are the tests that we shall apply in relation to Britain before we make a recommendation. That recommendation will have to be passed, not only by the House and by Parliament, but by a referendum of the British people.

§ Mr. Townend
Does the Chancellor agree that our European partners consider EMU a political, rather than an economic, issue—the great leap forward to political union? That is why they will proceed with EMU, regardless of the fact that some countries do not meet the 544 economic convergence criteria. Is it not nonsense to say that economies have converged when one of the most important criteria—unemployment—is not being considered? How can economies be said to have converged when Spain has 22 per cent. unemployment, Germany has 12 per cent., France has 12 per cent. and we have 5 per cent.?

§ Mr. Brown
It is precisely because unemployment is high in Europe that we have taken our initiatives including the Luxembourg special conference on jobs; the action plans that will be set by member states; and the commitment given by countries to reduce youth and long-term unemployment.
As for Europe, I know that the hon. Gentleman has always been against a European monetary union and none of the facts either way will change his mind on the issue. He should note that, whereas in the first five years of the 1990s, inflation was nearly 6 per cent. on average in Europe, it is now just over 2 per cent.; and, where deficits were about 6 per cent. of GDP, they are now about 2 per cent. as well. Considerable progress has been made towards convergence in those European economies.

§ Mrs. Dunwoody
My right hon. Friend will of course accept that the price for that has often been high unemployment. [HON. MEMBERS: "Hear, hear."] Would he be kind enough to ensure that whatever happens in relation to the creation of the monetary system, a full discussion takes place with the British public so that they understand the disadvantages and not the supposed advantages alone?

§ Mr. Brown
We are not only committed to a referendum if that decision is recommended by the Government and the House: we are also committed to making sure that the British public are informed about economic and monetary union and all the issues referring to it. My hon. Friend should note that the issue of employment is uppermost in our mind and it is one of the five economic tests that we have set down. In order for monetary union to work, we will have to reduce substantially the amount of unemployment in Europe. The cheers of support for my hon. Friend from Conservative Members come a bit strange because it was their party which said that unemployment was a price worth paying.

§ Mr. David Heath
In the right hon. Gentleman's discussions in ECOFIN or elsewhere on monetary union, has any consideration been given to the future of the administrative currencies and will the advent of the euro mean the demise of the green pound?

§ Mr. Brown
Matters of agricultural reform are under discussion as a result of the Commission's proposals to reduce the amount of money spent on the agricultural budget. We are profoundly committed to such reform. The hon. Gentleman will see us pursue proposals during our presidency and afterwards that will attempt to reduce that agricultural budget. Of course there will be consequences for the agricultural pound as a result.