Brown set to reaffirm British policy on euro

The British Chancellor of the Exchequer, Mr Gordon Brown, is expected to use a keynote speech in London tomorrow to reaffirm government policy that British entry into EMU can only happen if economic conditions are favourable and voters back entry in a referendum.

Mr Brown's speech will be delivered as the Conservatives seek to capitalise on speculation of a cabinet rift on the issue.

Mr Brown, who favours a "prepare and decide" approach to the euro, will make his speech to financiers at the Mansion House against a backdrop of increasing pressure from pro-European members of the cabinet for the government to make the case for joining EMU.

The euro debate in Britain was back under the spotlight yesterday when the British prime minister, Mr Tony Blair, praised the performance of the euro.

In an article for the Financial Times he called for further economic reform to build on the "success" of the single currency and described the euro as "changing the face of Europe". Government policy is to defer a decision on entry until after the next general election, which is widely expected next year, but Mr Blair is facing growing pressure from some trade unionists and business leaders, as well as several cabinet members, to adopt a positive stance on the euro.

Public opinion in Britain, however, is currently against joining the euro.

But Mr Blair's positive comments and assessment that "British exporters, inward investors and the people they employ all know how damaging exchange rate instability can be" were being read as a signal that economic reform in Europe, coupled with convergence between British and euro zone economies, could smooth Britain's path toward entry.

It was also noted in the article, which was co-written with the Spanish Prime Minister, Mr Jose Maria Aznar, that Mr Blair's reference to exchange rate instability closely resembled comments made by the pro-euro Northern Ireland Secretary, Mr Peter Mandelson, last month.

At that time, Mr Mandelson warned that British industry could not be protected from currency volatility while Britain remained outside the Single Currency.

The Conservatives, who are running a nationwide campaign to keep sterling, seized on the prime minister's article accusing Mr Blair of "two-timing" the chancellor and Mr Mandelson over government policy on the euro.

The Shadow Chancellor, Mr Michael Portillo, said Mr Blair's answer to Cabinet divisions was simple: "He agrees with everyone."