Osborne in euro attack on Labour

The euro would make economic recovery harder, Mr Osborne will say

George Osborne has criticised Labour's "euro-fanatics" following speculation that senior politicians have talked of joining the single currency.

European Commission boss Jose Manuel Barroso said the UK was "closer than ever" to joining the euro.

In a speech the shadow chancellor said euro supporters had "seized on economic difficulties for political ends".

But Europe minister Caroline Flint said that was "nonsense" and there were "no plans for Britain to join the euro".

'Wrong solution'

In a speech to business leaders in the north east of England, Mr Osborne said scrapping the pound would make the UK's economic problems worse not better.

In a recent interview with French radio Mr Barroso said "the people who matter in Britain are currently thinking about it".

The move was now more attractive because of the effects of the global credit crunch, he claimed, adding that "some British politicians have already told me, 'if we had the euro, we would have been better off'."

It didn't take long for the euro-fanatics in the Labour party to seize on our economic difficulties for their own political ends George Osborne Shadow chancellor

Business Secretary Lord Mandelson told the BBC on Wednesday Mr Barroso was not referring to him and he could not remember having a recent conversation with him about UK entry to the euro.

But he added: "My view is that the government is right to maintain a long-term policy objective of taking Britain into the euro, but it's not for now."

In his speech, Mr Osborne said: "It didn't take long for the euro-fanatics in the Labour party to seize on our economic difficulties for their own political ends.

"It's true that our economy is doing worse than the rest of Europe. But our deteriorating economic performance is not a good reason to join the euro. "

'Wrong solution'

The value of sterling compared with other currencies has fallen during the credit crunch, and the UK government has had to spend massively in recent months to try to support the economy.

Mr Osborne said: "The dramatic fall in the value of the pound over the last few months has led some to conclude that the answer is to abandon it [the pound] altogether," he said.

"That is exactly the wrong solution. Sterling's decline is the result of a damning verdict from international markets on British economic policy.

George Osborne is shoring up his own standing in the Conservative party by synthetic outrage over a non-story Caroline Flint Europe minister

"The solution is better policy to restore confidence in Britain's long-term prospects."

Europe Minister Ms Flint said there were "no plans" for Britain to join the euro and Mr Osborne's comments reflected the Conservative "obsession" with Europe, while most people were concerned about the economy.

She added: "David Cameron promised to stop 'banging on about Europe' but because of his misjudgements on the economy George Osborne is shoring up his own standing in the Conservative party by synthetic outrage over a non-story."

In 1997 Gordon Brown, seen as less keen on the euro than Tony Blair, set five economic tests which had to be met before ministers would recommend UK euro entry and holding a referendum.

The key test is whether the UK economy is coming together with those of countries in the eurozone and whether this can be sustained in the long-term. The second test, linked to this, is whether there is sufficient flexibility to cope with economic change.

The remaining three tests assess the impact of joining the euro on jobs, foreign investment and the financial services industry.

Opinion polls have suggested that any vote on scrapping the pound and adopting the euro would be lost, and in the UK the currency has not been a significant political issue for years.