Yesterday's statement on the European single currency by the British Chancellor of the Exchequer, Mr Gordon Brown, is a welcome affirmation of his government's intention to join - when and if it considers the conditions are right to do so. By saying it is in Britain's national interest for the single currency to work he has signalled a historic shift in its orientation towards the central fact of European integration in this generation. But by effectively ruling out EMU membership for the next six or seven years he has ensured that Britain will have limited influence on its design. He has also made it more difficult for Britain's European partners and competitors, especially Ireland, to manage their participation in the single currency over its initial stages. These difficulties are dramatically brought home by yesterday's collapse of share prices on Wall Street, the worst since 1987, which must in due course affect European currencies. Mr Brown placed much emphasis on British preparedness for EMU. He blamed prolonged Conservative indecision over the single currency for the lack of planning and adaptation of the British economy. His series of five tests to establish whether it is timely for Britain to join cover stability and sustainability, economic flexibility, investment, financial services and employment. His stress on Britain's distinctive economic cycle is the strongest argument in this armoury, which otherwise reflects difficulties and risks common to the likely 11 of the 15 EU memberstates expected to join the first wave of EMU. Had it not been for the intense debate on Britain's proper international role and national identity between the Conservatives and the other parties it would have been easier for Britain to take these risks - including the risk that the single currency will not succeed. It would arguably be more in Britain's interests to take this risk along with rather than aside from its EU partners.
Political preparedness for the project thus determines most of the rest of the economic case. Mr Brown's statement goes as far as is feasible for the Labour government, steering between its commitment to holding a referendum, in which it would face the opposition of important sectors of the national media, and pressure from its own Europhiles, big business, the City of London and the trade union leadership to take a more adventurous course. The decision to postpone EMU entry until after the next election will paint Labour as the pro-European party in that contest, along with these forces but presumably minus the Murdoch press, and reinforce Conservative hostility. Such are Labour's calculations. Assuming they lay the groundwork for a second Labour term, Britain would be in a position to assume a greater leadership role in Europe early in the new millennium.
In the meantime it will strengthen its case to be taken seriously as a genuinely committed partner in the EU by living up fully to its obligation in the Maastricht Treaty to deal with the common currency as a matter of "common concern". Yesterday Mr Brown ruled out British membership of a new exchange rate mechanism to encompass currencies not in EMU. If this means Britain reserves the right to tolerate competitive sterling devaluations over the next six years rather than stick to the glide-path towards the single currency implied by yesterday's statement, it will face a difficult time convincing other EU governments of its good faith. The Government of this State has a vital interest in determining an entry rate for the pound to join the single currency next year - and then in managing economic relations with a Britain not yet in the EMU. It should not hesitate to express these interests in the forthcoming negotiations.