Paul Anderson, Chartist column, January-February 2002
In purely economic terms, the launch of euro notes and coins on 1 January does not matter a great deal. Monetary union has been in place three years, and business transactions in euros have long been commonplace. The only significant economic effect of the new money is greater price transparency for consumer goods — though it remains to be seen how far that will translate into levelling down of prices.
But the arrival of euro notes and coins is massively important symbolically. Up to now, monetary union has been intangible to most citizens of the euro-zone. Now they are dealing with it physically all the time. Euro notes and coins cannot but make them aware of the central importance of European Union institutions in their everyday lives.
The impact of the changeover in Britain is harder to assess. Pro-Europeans in the government are hoping that its arrival will soften British opposition to joining the single currency. They believe that, as Brits use the euro on their holidays this summer, they will come to realise that it is nothing to be afraid of.
With the help of a little judicious campaigning by the government, their argument goes, the opinion polls will start to show the gap narrowing between those against and those in favour of joining. The Treasury will then conclude that Gordon Brown’s famous “five economic tests” have been passed — and everything will be set fair for a referendum on British euro membership some time in 2003 or 2004, which the “yes” campaign will win at a canter. The Tories will be left in disarray and Labour will romp home in a third successive landslide in 2005 . . .
This is a plausible scenario — but it is a touch optimistic. For a start, it is by no means certain that Brits using the euro on holiday will do anything to reduce opposition to British membership of the single currency. The anti-euro camp’s prophecies of chaos might have been made to look foolish by the smoothness of the changeover in early January, but it remains a powerful and articulate lobby with a simple, emotionally attractive case and, most important, the means to get it across to the public.
Back in the 1970s, the anti-Common Market lobby had little support in the press and the backing of no major political party. Today, the anti-euro camp enjoys the unconditional and vigorous support of the right-wing press — Rupert Murdoch’s four titles, the Mail and its Sunday sister paper, the two Telegraphs — as well as the Conservative party. With economic growth in the euro-zone sluggish and likely to remain so, it will not be hard for them to mount a case for staying out.
In such circumstances, it is questionable whether anything other than a major populist campaign in favour of euro entry, with the explicit backing of the government and emphasising the benefits of the continental model of “social capitalism”, has any hope of changing public opinion. Yet this is something the government has so far shied away from.
If public opinion on the euro doesn’t show any sign of shifting, it is most unlikely that the government will risk a referendum. And it has a ready-made means of wriggling out of its commitment to one by deciding that the five economic tests have not been passed.
There was a lot of fuss at the beginning of January about the remarks of the most senior civil servant in the team doing the economic assessment, Gus O’Donnell, to the effect that economics was not clear and unambiguous and that the decision on euro entry would have to be taken by politicians. But he was doing no more than stating the obvious: ultimately, joining the euro is a political, not an economic, decision. And it would be very easy to adapt the economic assessment to support either entry or staying out (at least for now), depending on what makes most sense politically.
Here, public opinion on the euro — though crucial — is not the only factor. The government is also aware that a euro referendum could be used by disgruntled voters to register an anti-government protest. Up to now, the Blair government has had a remarkably easy ride from the British public. But this will not necessarily last forever. On all sorts of issues — the health service, the railways, education — there are signs that the public is growing impatient. Add an economic downturn (by no means impossible despite the current talk that Britain has escaped the world recession), and it could easily be that by 2003 the government is really struggling.
In other words, it is still worth taking claims that the referendum will happen this parliament with a large pinch of salt. Put simply, there’s too much that could go wrong in the next couple of years.