11 June 2001, 18:08  UK unlikely to join EMU during current parlament

By Philip Uglow
LONDON (MktNews) - Despite continuing market speculation that the UK could shortly adopt the single currency, a majority of City analysts believe that the UK electorate will not be persuaded to give up the pound.
In a survey conducted Friday by Market News International, 10 out of 15 analysts said that they thought the UK would not join the single currency within the life of the current parliament (2001-2006). One analyst thought that there was a 50% chance of entry.
A majority of those polled also said that they felt Blair would call a referendum on the issue, although they noted that he would be unable to persuade a largely eurosceptic electorate of the perceived benefits.
Nine out of 15 analysts surveyed said they expected a referendum to be held within the next five years, with most expecting it to take place in Autumn 2002.
"There is clearly a big push from the government trying to convince the public that EMU is a good thing. However, I think it will be an uphill struggle and I am not convinced that opinion will move sufficiently to win a referendum," said Philip Shaw, Chief Economist at Investec.
Shaw believes that Prime Minister Blair will not even get as far as calling a referendum on EMU membership for fear of losing. He added that it is quite possible that the government will argue that the five economic entry criteria will not be met.
Chancellor Brown has laid down five key tests which need to be met before the UK joins the single currency. These are: are business cycles and economic structures compatible; if problems emerge is there sufficient flexibility to deal with them?; would joining EMU create better conditions for firms making long-term decisions to invest in Britain?; what impact would entry into EMU have on the competitive position of the UK's financial services industry?; and will joining EMU promote higher growth, stability and a lasting increase in jobs?
Julie Collins-Thompson, economist at BNP Paribas, argues that Blair will probably call a referendum, but will be unable to drum up enough support for EMU.
"There's a good chance that we will have a referendum given the Labour push, but I'm not convinced that the "yes" campaign will win," she said.
Collins-Thompson added that even the Danes, who are probably the most pro-European of the EMU 'outs' could not persuade the public to abolish the krona.
A minority of analysts disagreed. John Butler, UK economist at HSBC, markets argues that if the government keeps pushing the euro argument they can easily win it. He notes that recent opinion polls on EMU entry have already shown a swing towards the pro-EMU camp.
Asked at what rate they thought sterling would enter EMU if the UK did actually adopt the single currency, most analysts thought a rate of Stg0.67 was likely. This is nearly 10% below current levels.

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