Mandelson says failure to act on euro will hurt UK economy

 

Britain's debate over the euro gathered pace yesterday with campaigners for the single currency warning of bleak consequences for the economy and relations with Europe if Britain indefinitely holds onto the pound.

As decision day over the single currency looms, a key ally of Prime Minister Mr Tony Blair and a number of business leaders said ruling out euro entry in this parliament would deter investors.

Mr Peter Mandelson, a former member of Blair's cabinet and still a close Blair confidant, said he hoped the government would say "yes" to the euro in principle, while taking a "final look" in 2004 due to current international economic uncertainty.

"My fear is that instead of saying yes, but take a final look next year, the government will say not yet...Many in the international business community will read that as never, or certainly not in the foreseeable future," Mr Mandelson said in an interview with Sky News. That would prompt investors to take their long-term projects elsewhere, he warned.

Chancellor of the Exchequer Mr Gordon Brown is set to announce the results of five economic tests on euro entry by June and he is widely expected to say the economics are not right to join the currency club.

Analysts and sources said Mr Blair, held to be more pro-euro than his sceptical chancellor, is fighting to keep open the option of a euro referendum before the next election, due by 2006.

Mr Blair has pledged to offer a referendum if the tests are passed although most Britons oppose scrapping the pound.

Business leaders backed Mr Mandelson's comments. "For foreign investors, the uncertainty caused by our prevarication over Britain's membership of the euro is highly problematic," said Mr Alan Wood, chief executive of Siemens and president of Manufacturers for the euro. - (Reuters)