31 January 2001, 10:00  Blair reportedly in new economic policy row

LONDON (AFX) - Prime Minister Tony Blair was embroiled in an embarrassing row over Europe last night after a high-ranking German government official suggested that he had accepted the need to sign up to a single European economic policy if Britain adopted the euro, the Daily Telegraph reported. It said the remarks, which led to frantic diplomatic exchanges between Downing Street and the Chancellery in Berlin, were made during a press briefing after Blair and Chancellor Gerhard Schroeder dined in private on Monday night. According to the newspaper, the German official implied that Britain, which has opposed ending the right of individual European Union nations to veto tax changes, would inevitably sign up to a common economic policy after joining the euro. Once Britain was a single currency member, it would then see the logic of a common economic policy. Those countries already in "euroland" felt that, "you cannot have one without the other." The official said: "I could well imagine -- and this was certainly not contradicted by the course of the dinner -- that when Britain is in euroland, the basis for this linkage will become clear." The Daily Telegraph said his remarks caused consternation in Downing Street because Blair is anxious in the run-up to an election to play down the prospect of early British membership of the euro. The Prime Minister's spokesman confirmed that there had been a brief discussion of the euro, but denied that the Prime Minister had discussed harmonising tax policies. Blair was said to have restated the government's position: that it was in favour of joining a successful single currency, provided the economic tests set by Chancellor Gordon Brown were met. British officials claimed that the German official was expressing his "personal view" of what might happen if Britain joined the euro.

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