Directors seek clarification on UK euro terms

Britain's Institute of Directors, an active opponent of the country signing up to the euro, has challenged the Blair government to be more specific about the conditions it has set for joining Europe's single currency.

The IoD issued a paper calling for a new "convergence contract" between the government and the British people which would set out "clear and concise" criteria for Britain giving up the pound sterling.

In 1997, the Chancellor of the Exchequer, Mr Gordon Brown, set out five economic tests for joining the euro, which include sustainable economic convergence and the effect on investment and employment.

But the IoD said the government had made no attempt to define what "convergence" really meant.

"Our convergence contract shows that the only sensible way the UK economy can converge with Euroland is if Euroland itself changes towards an Anglo-American style system," said the IoD's chief economist, Mr Graeme Leach.

"This is highly unlikely to happen and explains why the IoD says the UK should stay outside the euro for the foreseeable future," he added.

The IoD's convergence contract suggested the following criteria:

The gross domestic product correlation coefficient between Britain and the euro zone should exceed that with the US for a decade.

The euro zone should account for more than half of total current account earnings for a sustained period.

The proportion of Britain's mortgage stock at fixed rates (currently around 75 per cent) should converge with the euro zone (5 per cent in France and Germany).

The gap between British and euro zone unemployment rates, activity rates and employed population rates, should halve, but with no deterioration of the British position.

The gap between British and euro zone taxes should halve, but without a deterioration in the British position.

Britain's Labour government supports euro entry in principle subject to its five economic tests and a referendum. It has effectively ruled out joining in the current parliament, which could last until early 2002.