Blair sounds a pro-euro note

The pound has fallen after Mr Blair's remarks

The UK may have moved closer to joining the single currency in this Parliament after the Prime Minister sounded a positive note about euro membership in his Labour Party conference speech.

If [the economic tests] are met we should join, and if met in this Parliament we should have the courage of our argument to ask the British people for their consent in this Parliament

Tony Blair

While he repeated the government's position that it will need to assess the economic impact of membership of the single currency first, he urged his supporters to have the "courage" of their convictions.

"If they (the five economic tests) are met we should join, and if met in this Parliament we should have the courage of our argument to ask the British people for their consent in this Parliament," Mr Blair said.

It is the first time the government has confirmed that it was actively considering a referendum on the euro in this Parliament.

Pressure on the pound

Financial markets immediately sold off the pound, which fell by more than a cent against the US dollar to $1.47, compared with $1.48 shortly before the speech.

"Blair's comments may have accelerated the move," said currency analyst Kamal Sharma of Commerzbank.

Gordon Brown: will make economic assessment

Most analysts believe that if Britain was to join the euro, the pound's value would have to fall against the euro and the dollar in order to protect manufacturing exports.

The UK manufacturing sector has been loudly complaining for some time about a squeeze on profits and a fall in exports, which it blames on the high value of the pound.

Meanwhile, the euro will become a reality for millions of citizens of the 12 countries in the eurozone on 1 January when it is introduced as a cash currency.

Economic tests

Labour Party chairman Charles Clarke told the BBC that the need for global international cooperation to fight terrorism made a referendum on the euro in this Parliament more likely.

In another passage, Mr Blair said that "Europe is not a threat to Britain. Europe is an opportunity."

However, the government might face a difficult task in convincing the public.

Opinion polls show that there is a two-to-one majority against British membership of the euro.

And there is still uncertainty over how the Treasury will evaluate the five economic tests for membership, which it has promised to publish within the next two years.

The tests specify that euro membership must be good for UK jobs, investment, and its financial sector, and that the UK economy must be converging with its European neighbours.

"The five economic tests are fairly ambiguous," said Mr Sharma. "The government's hand is very, very flexible still in its assessment."

And the economic slowdown that has been accelerated by the terror attacks in America may also change that assessment.

With Britain's economy weathering the storm better for now than other eurozone countries, the convergence between their economies may have slowed.