Brown quashes euro rumours

Gordon Brown and Bank of England Governor Eddie George at the Lord Mayor's Mansion House dinner

UK Chancellor Gordon Brown has insisted that the government has not changed its policy on adopting the euro.

We cannot prejudge the five economic tests

Gordon Brown

Giving his annual Mansion House speech to bankers and merchants of the City of London on Thursday evening, Mr Brown said he would not "fudge" the five economic tests set by Labour.

Drawing the line firmly under recent squabbles in the Labour Party over whether membership of the European single currency should be hastened, he said a "short-termist" approach to the euro would put at risk economic stability in the UK.

No hidden agenda

At the dinner hosted by the Lord Mayor of London, Alderman Clive Martin, Mr Brown said Labour's "prepare and decide" policy would be met "in full".

Five tests

Economic convergence to be sustainable

Flexibility to cope with change

Improve investment

Not harm financial services industry

Good for employment

He said: "Some opponents allege that we intend to fudge the tests, that our intention is to join as quickly as we can get away with, irrespective of whether there is the sustainable convergence we need.

"And thus the tests are merely a political and tactical device to disguise what is a hidden agenda.

"I reject this view. As the Prime Minister has said, the tests must be met.

"We cannot prejudge the five economic tests. To do so before we have secured sustainable convergence would risk repeating past failures."

He also reiterated that "the people would have the final say".

And he repeated his own belief that membership - at the right time - would be a good thing: "The potential benefits of a successful single currency are obvious - in terms of trade, transparency of costs and currency stability."

Bumpy ride

Governor of the Bank of England Eddie George also stepped into the euro debate with a warning that the uncertainty surrounding the exchange rate with sterling could result in a "bumpy ride" for the UK economy.

In his own annual Mansion House address, Mr George said it was difficult to be confident that the recent dilemma over the strength of the pound against the euro would not re-emerge.

However, he said the risks to stability from imbalances in the UK and world economy had diminished.

The majority of the Bank's rate-setting monetary policy committee felt that the economy would grow steadily over the next two years and inflation would remain close to the target rate of 2.5%, he added.