Viewpoint: Stop going on about the euro

Cabinet tensions over joining the euro have been on display again and pro-Europeans both within and without the Labour Party have been urging Prime Minister Tony Blair and his government to take a clearer lead on the issue of signing up to the single currency.

Labour life peer Lord Desai, a self-confessed Euro-federalist and longtime supporter of joining the euro, now calls on his fellow pro-Europeans to stop agitating on the subject - and to concentrate instead on winning a second term in office.

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By Meghnad Desai

The debate about the euro that has suddenly flared up in the Labour Party is unnecessary, untimely and unhelpful.

It would be a tragedy if the desire of some people to seem more pro-European than thou ruins our chances of re-election

It is unnecessary because whatever the outcome, whether of the Byers-Jackson variety or the Gordon Brown position, nothing can be done about it either way until after the next election.

No referendum on joining the single currency can be called before then and both sides are agreed that we will have a referendum at some time soon after the next election in any case. So what is gained by starting a debate now?

It is untimely because the last thing Labour needs right now is a show of a divided cabinet and Parliamentary Labour Party, as well as the party on the ground, all for the sake of an event - joining the euro - which at best will not happen before 2004.

It is unhelpful because it distracts the party from what should be its primary aim: winning a second term.

Election dominates all other objectives

For me, as for many others in Labour, winning a second term dominates all other objectives and it would be a tragedy if the desire of some people to seem more pro-European than thou ruins our chances of re-election.

As far as I care, the euro can wait till then - and if necessary, a long time after that.

I say this not as a Eurosceptic but as an enthusiast, though a disappointed one. Twenty-five years ago I was in a minority within the Labour Party who voted Yes in the 1975 referendum on the Common Market.

Since then I have watched the growth of the Common Market into the European Economic Community. and now the European Community and European Union, with enthusiasm.

I welcome the direct elections for the European Parliament and its growing power. I would ultimately like to see the European Commission accountable to and appointed by the Parliament - though I would add a second chamber representing the many national parliaments.

I would even be happy to go in a much more federalist direction. There is, in any case, no way of making a success of a single currency without a single fiscal authority to match the single monetary authority - the European Central Bank.

Not much to choose between them

Like the new Millennium Bridge, the euro is a little wobbly. It needs stabilisers before we get on it

I say all this because in my stance on the euro I want to make it clear that I do not see the question of joining the single currency from a Eurosceptic perspective.

For me, however, a single currency is an instrumental thing. If it performs the functions that a currency should and is distinctly better than our present currency, then I am all for joining.

A currency has to be stable in terms of its internal purchasing power (inflation rates) and its external purchasing power (stability of the rate against other currencies).

The euro is good on the first count but so is the pound, especially since 1997 when Chancellor Gordon Brown gave the Bank of England power to set interest rates and an inflation target of 2.5%.

The pound has been volatile, but then so has the euro. Indeed, since its launch it has been more volatile than the pound.

The pound has depreciated against the dollar but the euro has depreciated even more. So as of the moment, there is not much to choose between the two.

No trains leaving

In 1975 we had an idea that "joining Europe" would be vital for the economic and political modernisation of the UK. We would grow faster, become richer and modernise our constitution.

But we did all that thanks not to Europe but because of Margaret Thatcher's determined and ruthless reform of the economy, and then the restructuring of our monetary and fiscal policies by Ken Clarke and Gordon Brown.

We have devolved power to the three other nations in the Union and are about to do so to metropolitan areas and even English regions.

We have achieved a stable economy with low inflation and faster growth than many EU countries.

So while it would be good to engage more closely with the EU, we no longer need it desperately to solve any urgent problem.

As to the advantage of staying out or going in to the euro, both sides exaggerate both the size and the speed of the consequences. There are no trains that we have to catch leaving any station.

No need to hurry

The euro has been launched. Like the new Millennium Bridge, it is a little wobbly. It needs stabilisers before we get on it.

The estimates by some of job losses are totally fantastic and, even if true, we got through even greater job losses and still improved the UK's economic performance in the 1980s. So job losses should not be a paramount consideration.

Nor should we fear the loss of monetary sovereignty. It all comes down to a question of costs and benefits. We will able to judge better later rather than sooner.

That, after all, is the point of Gordon Brown's five economic tests on whether we should join. There is no hurry.

In the meantime, we should get on with the really urgent job of preparing for the next election and giving Labour its first full second term in a hundred years.

Lord Desai is professor of economics at the London School of Economics and a former Labour frontbench spokesman on the economy.