Turbulence Means Government Should Not Delay a Euro Referendum

Speech by Chris Huhne MEP delivered to the Liberal Democrat Conference on Mon 24th Sep 2001

The horrific attacks on Washington and New York on September 11th have weakened an already fragile world economy.

That was why both the US Federal Reserve and the European Central Bank - accounting for two thirds of the developed world - cut interest rates a week ago. I hope we will hear less in Britain about how the ECB takes too little action too late.

This was always ridiculous. The ECB's interest rates have consistently been lower than ours. Since the Euro's launch in January 1999, the Euro-area has grown more quickly than Britain. Over the last year, the Euroarea has created jobs at double the British or the American rate. And there are now 5.4 million new jobs in the Euro-area. So much for too little too late.

As for speed, last week it was the Bank of England that had to play catch up for the second time in a year following the co-ordinated moves by the US Fed and the ECB. The UK is just too small to be in the loop. There is no doubt we stand shoulder to shoulder with the US against terrorism. But when Alan Greenspan, the head of the US Fed, wants global economic action he calls ECB President Wim Duisenberg in Frankfurt, not Sir Eddie George in London.

The World has changed. Like it or not, the Euro is here. With 12 member states, and 301 million people, the Euro is today protecting its economies from the turbulence of speculative capital flows. In other world crises, Europe's currencies and interest rates have bobbed around like flotsam. No longer. In this economic environment, the Euro is not less relevant, but more so. And from January, the Euro will become a reality in people's pockets as well. In Tipperary and Turin, Bordeaux and Bremen, cash machines will be giving out euros. Don't underestimate the psychological or economic impact.

Only not here. No euro please, we're British.

The chance to end rip off Britain will pass us by.

The chance to stop paying a third more for a Ford Focus than in the Euro-area. To stop paying a fifth more for a collection of goods - Sony Playstation, Chanel no 5 , Levi jeans and others surveyed by the Eurosceptic Sunday Times. To stop paying double for a can of Coke. We can pay in pounds, but only if we pay through the nose. When it comes to bargains, choose the Euro. It's the real thing.

Our businesses are missing out on cheaper funding. Lower cost suppliers. Missing out on the certainty of knowing what your revenues are if you sell to Germany or Italy. And that is a real cost. Ask Britain's manufacturers. The overvaluation of the pound has cost 452,000 jobs over the same period. Like the lost jobs in farming or tourism, those are jobs that could have been viable. That would be viable again with a sustainable level of the pound.

And that is the answer to the charge that the Euro means one size has to fit all. Who are we kidding? Anyone would think that sterling was a useful lever to deliver happy economic outcomes. That's yesterday's theory. Sixties economics. The high pound caused more than a million job losses in the early eighties. Then the pound plummeted. When Nigel Lawson raised interest rates in 1985, it was to appease Zurich and New York and stop the pound falling below one dollar. Interest rates were not set then for Britain's needs. There is one word that goes with sterling. Crisis. Sterling and crisis go together like eggs and bacon. One size does not fit Britain. It fits the gnomes of Zurich.

Nor should we take the meat out of the motion on the exchange rate, as the proposed deletion does. We need to get sterling to a sustainable level - that is the crucial sixth test set of the expert commission - and that involves the preparations set out in the motion. Without a clear signal, sterling will not move to a sensible level. And that will mean more lost exports. More output falls. More job losses.

Our opponents like to claim this party is in favour of the euro come what may. Far from it. We have faced up to the difficulties. We have set out a clear condition on the entry rate that will safeguard jobs and stability. And we have put forward proposals for meeting it.

This motion injects a missing sense of urgency. We have a limited window of opportunity in this parliament. Not just until Autumn 2002, as the amendment suggests. It could be until Autumn 2003 if there is a five year parliament.

But any referendum must be early enough in the parliament so that a yes vote can lead to the introduction of euro notes and coin before the next election. We want to win one referendum. We don't want Ian Duncan-Smith to turn the next general election into another referendum because he did not like the answer in the first.

And if there is any uncertainty about a reversal of policy, the pound will not align to sensible levels. We will not save jobs.

That is why the Prime Minister and the Chancellor must decide soon to put the question. If they don't decide, events will decide for them. Choices not taken are no longer choices. Stop dithering, Tony. Stop preparing to decide. Just decide.