/www.bloomberg.com/ By James Kirkup
London, March 10 (Bloomberg) -- U.K. Chancellor Gordon Brown will today tell European Union leaders they have ``a long way to go'' to overhaul their economies and signal that progress on boosting European growth will help determine whether Britain joins the euro.
Brown, whose Treasury department will judge the economic case for joining the euro by June, has often lauded Britain's economic performance, raising analysts' speculation that he thinks the U.K. is prospering outside the 12 EU nations sharing the common currency.
``In a single currency area where the old flexibility to adjust exchange rates and interest rates are no longer available at a national level, labour, product and capital market flexibility are even more essential,'' Brown will say, according to a draft of a speech to the Centre for European Reform in London ``There is still a long way to go.''
Brown's words are a challenge to the leaders of the 15-nation EU, who gather in Brussels next week to discuss economic reform. The EU has set itself the goal of matching the U.S. economy by 2010, though countries led by France have held up efforts to cut red tape and open up markets such as energy and telecommunications.
While the U.K. economy is growing, gross domestic product in the region may contract this quarter, the European Commission has forecast.
The European Central Bank last Thursday cut interest rates to the lowest in almost 3 1/2 years amid rising unemployment, faltering consumer confidence and waning demand for exports. On the same day, the Bank of England left interest rates unchanged.
``If were are to make the most of the potential of open trade and the single market we will need even greater flexibility,'' Brown will say in a speech due at 9.30 a.m. London time. ``To achieve full employment in Europe we will need much of the flexibility of America applied to much of Europe,'' Brown will say, in remarks that may off-set some recent signals that he's warming to the euro.
Last month he told a panel of lawmakers that the ECB has delivered ``a degree of stability'' to the euro nations. He also said Britain was succeeding in the debate about relaxing EU budget rules to allow governments to borrow to spend on public services.
Bank of England Governor Sir Edward George last week said the 13 percent decline in the value of the pound against the euro has lowered one of the hurdles blocking the U.K.'s path into the European common currency.