Britain has sent the strongest signal yet that it is moving toward joining the single European currency, saying monetary union appears so far to be working. Our correspondent in London, Ben Partridge, reports.
London, 9 September 1999 (RFE/RL) -- British Foreign Secretary Robin Cook chose a business forum in Tokyo this week to deliver a surprisingly positive endorsement of the new currency, the euro, just eight months after its launch.
He said there are signs that the euro is bringing a new strength to the 11 European Union countries that have joined the single currency zone, the second-largest economy in the world after the U.S. The so-called Euro Zone stretches from Spain in the south to Finland in the north and comprises 300 million consumers.
Four countries have stayed outside the Euro Zone: Britain, Sweden and Denmark are taking a wait-and-see attitude, while Greece failed to satisfy the membership criteria because of economic weakness.
Cook said evidence suggests the euro is stimulating investment and restructuring in the Euro Zone and encouraging EU nations to undertake serious reforms to liberalize their economies.
He said France -- one of the anchors of monetary union -- is now creating jobs faster than anywhere in the world outside the United States. Across the new Euro Zone, he said, borrowers and mortgage payers are also benefiting from lower interest rates. Cook said, if these trends continue, the single European currency will bring significant benefits to those countries that are part of it.
His remarks follow evidence that the European economy is beginning to pull strongly out of the economic doldrums triggered last year by the crises in Asia, Russia and Latin America.
Figures show rising manufacturing orders and exports in Germany -- the euro zone's biggest economy -- and a fall, to 10.2 percent, in the region's high unemployment rate.
Cook's upbeat assessment of the euro follows its rocky launch, when it initially lost almost 15 percent of its value, falling to near parity to the U.S. dollar, before recovering. It stood today around $1.06.
Cook's remarks clearly reflect concern that Britain will lose political influence and economic opportunities if it stays out of European monetary union. His comments are aimed at British voters who will be asked to say "yes" or "no" to the euro in a referendum to be held after the next general election.
Britain's Chancellor of the Exchequer [Finance Minister] Gordon Brown says there are five economic tests Britain must meet before it can join the single European currency. The five tests are:
-- Is there sustainable convergence within the Euro Zone?
-- Will the euro promote investment?
-- Will it be good for jobs?
-- Will it boost the financial services industry?
-- And is there sufficient flexibility in the British economy to join the euro?
British Chancellor Gordon Brown said:
"Nobody would want to join the euro unless we met these five tests. And these five tests have got to be met, and I have said that the assessment is likely to take place early in the next parliament."
Although Britain's Labor government is sounding a more positive note, there are many critics who are dubious about membership.
Skeptics say the economy of the Euro Zone is recovering, not because of the success of the euro, but because a long-delayed cyclical recovery -- after months of stagnation -- has finally begun.
In particular, they say France is creating jobs at a much faster rate only because the sharp fall in the euro amounted to a 10-percent devaluation of the franc, making French goods cheaper.
The skeptics also say that the "one-size-fits-all" interest rates set by the European Central Bank cannot be sustained because the Euro Zone countries -- with divergent growth and unemployment rates -- need different interest rates to suit their circumstances.
Other observers point out that there are arguments to be made for and against the single currency, but that it will take longer than eight months to make a proper judgment on success or failure.
Still, as Cook's speech made clear, the British government is keen to stop a drift toward so-called "euro skepticism" at home -- and to show the rest of Europe that it remains engaged with the single currency project.