BBC News Online: Business

Could join, won't join

In theory nations must show annual borrowing does not exceed 3% of national wealth and that they have a national debt that is less than 60% of national wealth.

According to provisional figures published by the Office for National Statistics, Britain's borrowing at the end of the calendar year 1997, as a percentage of gross domestic product was 1.9%.

This was down dramatically from 4.8% at the end of 1996, and 5.5% at the end of 1995.

The national debt is also well under the qualifying threshold of 60%, standing at the end of 1997 at 53.4%, compared to 54.7% the previous year, and 53.9% at the end of 1995.

Final figures will be published on March 13, but if there is any difference it is expected to be slight.

The 1.9% borrowing figure is virtually exactly in line with what the government forecast in the November pre-budget report.

Britain's inflation is also well within the criteria set in the Maastricht Treaty and based on the harmonised formula for comparing countries' figures.

The Chancellor of the Exchequer, Gordon Brown, said in November last year, that Britain had no objection in principle to joining the Economic Monetary Union (EMU) and adopting the single currency.

But he said the single currency would have to meet five key economic tests about the benefits of joining before deciding to do so. The criteria are:

• Convergence of the UK and European business cycle
  Mr Brown said these were currently out of line, most notably so in the large divergence of interest rates. He predicted the differences would become less distinct during the coming years.
• Flexibility of labour markets
  The Chancellor said Britain was still plagued by persistent long-term unemployment. He said the government had introduced a programme to improve market flexibility, but more was still needed.
• Investment
  In order to join EMU, Britain would have to be sure that this move would create better investment opportunities, but British business was not ready for this step yet.
• Impact on the British financial services industry
  Mr Brown said the industry would thrive whether the country was in or out of EMU. However, the position of the City of London would be strengthened if Britain joined EMU.
• Prosperity and jobs
  The Chancellor said, if EMU were good for jobs, then it would be good for Britain. Again, he predicted that EMU would create more trade and business, and thus more jobs - but that the British economy was not yet ready to make this step.

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Internet Links

The Office for National Statistics news releases
European Monetary Institute

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Summaries

In this section

Eleven hit euro targets
Making a buck from burgers
Ferry merger gets go-ahead
Silver Seraph rolls into limelight
Finance ministers discuss ditching dollar
House prices 'near 1980s record'
£550m windfall for investors
Last chance to spend old 50ps
Clinton appeals: 'No net taxes'
Jobs boost for Wearside
Call centres: the new sweatshops of Britain?
Irish turning tables in boardrooms coup
The battle for Diana's lucrative legacy (From Special Report)
E-commerce - the online shopping boom
Does size matter? (From Despatches)
Argos attacks GUS offer

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