In a widely telegraphed political and economic decision the double act of Prime Minister Tony Blair and Finance Minister Gordon Brown confirmed their mantra on joining the Euro was: yes, but not quite yet.
Given the miserable state of the large Continental economies, the differences in their economic cycles compared with Britain and the differing structures of their economies, that decision would seem effectively to be a no-brainer. Only the hate Britain brigade that infects much of New Labour could have thought otherwise. However, the Europhile Tony Blair is anxious to join as quickly as possible. He has to worry about his career after Number 10 Downing Street and an international role away from the grubby realities of UK politics is financially and socially attractive. But a career in Europe requires him to get Britain into the Euro.
Gordon Brown has a different agenda. He just wants Blair to leave and to bequeath him the position, that of Prime Ministers, he so covets. He has resisted Britain joining the Euro until today on the sound economic grounds that it would have been a disaster for the economy. But in his desire to be Prime Minister we saw last week the beginnings of a sell-out of principle over power. Brown agreed to a review of the conditions of Britain's entry within a year and a plan to accelerate Britain's economic convergence with the sclerotic Euro economies. The cynics might, of course, say he had done plenty in the prior six years with his tax, spend and regulate policies that have significantly reduced the economy's advantages in terms of flexibility over its competitors.
A political obsessive he has determined that should Britain lose control over monetary policy, as it would in the Euro, he could compensate by an even more active fiscal policy. That would be right up his street, allowing him to further redistribute income and wealth significantly. There is the little matter that the Stability and Growth Pact would need to be renegotiated, but that is essential anyway given the Euroland economic performance.
But talk about déjà vu! The hyperactive fiscal policies were tried to excess in the 1960s and 1970s leading to over taxation, over regulation, economic stagflation and were eventually dropped by Thatcher and Reagan taking the advice of the supply-siders and the Friedmanites. But then political economics tends to go in cycles just like the fashion industry.
There is just one problem for Brown and Blair. They first have to win a referendum. That becomes less likely by the week. The public may be apathetic but is cynical and not stupid. They can see when they are about to be sold a pup. If membership in the Euro means lower growth and increased taxation of housing through increased stamp duties and possibly capital gains on owner occupied properties, the middle classes and the aspiring classes will finally revolt. Even the hapless Tories should be able to win such a referendum, send Mr. Blair to an early retirement on the US lecture circuit and frustrate the socialist Mr. Brown, a man who would have been comfortable as a Soviet Minister of Gosplan.