UK 'close to eurozone'

Will the UK become a member of the euro family?

The UK economy has much more in common with the eurozone than some of the single currency's existing members, according to a new report.

Paris-based think tank, the Organisation for Economic Cooperation and Development, said existing differences between the UK and eurozone economies were shrinking, bringing the UK economy closer and closer to that of the eurozone.

"On several scores, even as an 'out', the UK is projected to be as close, or even closer, to the economic centre of gravity of the euro than some of the current 'ins'," the OECD said.

For example, the difference in the eurozone and the UK's growth potential for this year and next was starting to decline.

"By end-2001, the remaining difference should be very small given the uncertainty surrounding output gap estimates, and also compared with the differences amongst euro area members," the report said.

Interest rates

It also said some gaps such as the differences in interest rates in the UK and the eurozone would be easy to close should the UK decide to join the euro.

The OECD noted the example of Ireland , which slashed its interest rates rapidly in order to become a euro member.

But the OECD said the remaining sticking point in a potential UK membership of the euro would be the strength of sterling against the European currency.

However, the euro has gained strength against the pound in recent days, bolstered by expectations of and then a subsequent interest rate rise by the European Central Bank.

The UK government has been careful to say that it will only consider joining the euro if it is in the UK's economic interest.

It plans to hold a referendum before signing up to the single currency.