LONDON, June 18 - Britain is right not to join the euro now, the Governor of the Bank of England said on Wednesday. Sir Edward George told the annual Mansion House dinner that in the short term there were too many risks -- particularly the weak pace of growth in Germany -- for any other judgement on euro membership at the present time.
Last week, British Chancellor of the Exchequer Gordon Brown said his five economic tests for membership had not been passed, offering around 2,000 pages of economic analysis to support his case and leaving the option open to rerun the tests next year. George has usually shied away from saying much on whether Britain should adopt the single currency, preferring to call himself a "euro pragmatist" though it was always suspected he was more of a sceptic. Joining would require a "leap of faith," he once said. But with two weeks left before he retires after 10 years at the helm and with Brown's assessment now out of the way, the Governor said he too felt that the case for membership now was just not there. "There are certainly short-term risks on either side, and given those risks -- including the risk of slower growth in the euro zone, particularly in Germany -- I agree with your assessment that the case for euro entry has not yet been made," George said as he thanked Brown at the dinner. At the same event -- the London financial district's social event of the year -- the Chancellor said that the same painstaking care and rigour invested in last week's assessment would continue at all times if the tests were run again.
"I can assure you that there will be no short-cuts and no fudge," Brown said. "Because to join in the wrong way or on the wrong basis without rigorously ensuring the tests are met, would not be in the national interest." But Brown also said that Europe is moving closer to Britain and that Britain should continue to lead in pursuing reform to ensure the continent could compete in the global economy. "We can bring to an end the old anti-European prejudices that arose from the inward-looking trade bloc of the past and ... build a pro-European consensus around a Britain leading reform in Europe and a reformed Europe playing its full part in the world," Brown added.
BETTER TIMES AHEAD
George also said that the economy looked poised for better growth as the effects of many of the external events such as the corporate governance and accounting failures in the U.S. and the war in Iraq began to fade. "There nevertheless remain reasonable grounds for thinking that the external environment will now gradually improve as we move through the second half of this year into the next," he said. This would help offset the moderation the BoE was seeing in consumer spending growth and open the way to better balanced growth with inflation remaining close to target. George also said there appeared to be signs of improvement in global equity markets, which have rallied in recent months.///