By Ruth Pitchford
LONDON, Oct 10 - British Prime Minister Tony Blair faces tough odds in his efforts to arouse public interest in taking the pound into Europe's currency union, according to economists polled by .
Blair went out of his way last week to remind his Labour party he supported euro entry if the economic conditions were right, spurring speculation that he might be gearing up to call a referendum on the issue.
But a survey of 28 economists this week put the average chance of Britain joining the euro within the next five years at just 38 percent -- exactly the same odds as they gave in June, shortly after Blair was elected to a second five-year term.
Twenty of the economists polled this week put the chances of Britain joining the euro by mid-2006 at less than 50 percent. Six put the chances at more than 50 percent and two at 50:50.
"You can toy with a referendum but it would get the thumbs down from the electorate," said David Brown at Bear Stearns in London, who put the chances of British euro entry within five years at zero percent.
Blair has won popular acclaim since September 11 for his ardent defence of the U.S. 'war on terrorism' and last week currency traders briefly envisaged him selling the euro with similar conviction to a sceptical British public.
The pound -- widely regarded as overvalued against the euro -- took a brief dip on Blair's comments. But it soon stabilised with the euro at less than 63 pence as the market recalled opinion polls showing up to 70 percent of Britons oppose entering the euro zone.
SCEPTICAL PUBLIC
"Our basic starting point is Blair will not call a referendum that he doesn't think he can win," said Ross Walker at RBS Financial Markets.
Those who doubt Blair can win entry say one major economic justification has been eroded since the last bid to tie the pound to other European currencies ended in ignominy in 1992.
When currency speculators drove sterling out of monetary union's precursor, the exchange rate mechanism, British governments still influenced interest rate policy and the country was viewed as chronically inflation prone.
But Blair's government has made the Bank of England independent, undercutting the old argument that Britain needed a European Central Bank to impose price disciplines.
Meanwhile eurosceptics are quick to recall the pain of 1992, when Britain struggled to manage a weakening economy with no option of letting a depreciating pound take the strain.
And some question the assumption that Blair's leading role in defending U.S. military retaliation will give him enough long-term public support to invest in a pro-euro campaign. "So far we've been fighting a Clinton-type war which doesn't involve any (British) casualties, but that could change," said David Smith at Williams de Broe in London.
He also questions whether the introduction of euro notes and coins to the euro zone next year will make the currency any more acceptable to British travellers as consumers struggle to calculate whether the new prices have been rounded up.
But some major global banks still rate Blair's chances of winning the British public round to voting 'yes' to the euro.
They say many voters are 'soft no's' who could be won over by a determined government pushing the argument that Britain must play a full role in shaping Europe's future.
"There's an inevitability about Britain joining," said Darren Winder at UBS Warburg, who gave the highest chances of British entry at 70 percent. "The only question is the timing."
Those who do expect entry during Blair's current term see a referendum in late 2002 or 2003, in line with the timetable he has sketched out for reviewing the economic arguments.