In his speech Brown said that only one of his five economic “tests” for embracing the euro as the British currency had been met in regard to its effect on the British rulers’ financial market. The government will delay a referendum on the issue.

Many in the big-business media interpreted the statement as indicating that adoption of the euro won’t happen. The Telegraph, for example, said, “Despite the pro-euro gloss of his statement, a referendum before the next election remains unlikely.”

Brown’s speech, which was accompanied by a 250-page “assessment” and some 1,700 pages of obfuscating “analysis,” was an attempt at a balancing act within the British ruling class, which is deeply divided on this issue. Many capitalists here are adamantly opposed to giving up the pound and establishing closer ties with the European Union—which remains dominated by the Franco-German axis—preferring instead to stick strictly with the British rulers’ historic “special relationship” with Washington.

Clashes over the issue have been reported between Brown and Labour prime minister Anthony Blair. The Telegraph stated, “The Chancellor, renowned for his skeptical approach to the euro, cloaked his ‘No, not yet’ verdict in the most pro-European rhetoric he has so far deployed.” Meanwhile, a week before the Commons statement Blair told the press he intended to lead a referendum fight for a “Yes” vote on the euro, saying, “I have absolutely no doubt that it is in Britain’s interests to be a full-hearted member of Europe.” Blair and Brown made a show of unity June 10 at a joint press conference, where they launched what they called a “patriotic case for Europe.”

Twelve countries within the European Union (EU) have joined the single currency. In doing so, their governments gave up not only individual currencies but also the power to set interest rates, which is now vested in the European Central Bank based in Frankfurt. Although a member of the EU, London has not joined the euro.

Brown stated that the United Kingdom has not “converged” sufficiently with the “Eurozone” economies—one of his “tests” for adopting the new currency—for it to surrender control over the cost of borrowing money. The British economy is at a different stage in the business cycle from those of its European competitors. Germany, Italy, and the Netherlands, in particular, are in recession. Neither France nor Germany have met the stipulation of the EU’s Growth and Stability Pact that limits budget deficits to a maximum of 3 percent of GDP.

Brown added that the immediate introduction of the euro would lead to greater volatility—price swings—in the housing market in the United Kingdom where 70 percent of householders “own” their homes—that is, are debt slaves to the banks that issued the mortgages—unlike in the Eurozone where renting is more common. Interest rates in the Eurozone countries are currently 2 percent, nearly half those in Britain at 3.75 percent. Brown also claimed that the impact of the euro on investment into the United Kingdom would be negative.  
 
Attacks on the social wage
At the heart of Brown’s comments on the two other failed “tests”—the impact of the euro on labor “flexibility” and unemployment benefits—was a call to the capitalist rulers in Britain, and throughout Europe, to step up attacks on wages, working conditions, and social entitlements. The British rulers have advanced further in these assaults than their competitors in the EU, particularly France and Germany.

“The view in London,” the Daily Telegraph stated, “is that economies based on the European social model veer too much on the side of worker protection.” The British rulers argue that more “structural reform”—the big-business press code for assaults on workers’ conditions and rights—is needed, the paper said. The paper praised the measures recently announced by the Schröder government in Germany—cutting back unemployment and other benefits—as a positive example.

In his June 9 statement Brown called for further “reform” in Europe and attacks on UK workers in the form of cutting back on national pay negotiations, particularly with trade unions in the public sector. This would allow employers to pay lower wages in certain areas. Anticipating the kind of resistance this would engender, The Times of London noted, prior to Brown’s parliamentary statement, “The acid test of flexibility…is whether Mr. Brown can convince an audience not of leading businessmen but trade unionists to embrace it.” Digby Jones, director-general of the Confederation of British Industry (CBI), a leading employers association, applauded Brown’s stance. “Brown is rightly making EU reform a centerpiece of UK government policy,” he said.

Reflecting the divisions in the ruling class, the British press is more or less evenly split over the euro issue, with both sides putting forward nationalist arguments.

In April The Observer ran an editorial titled “We belong at the heart of Europe—Why Britain should join the Euro.” Its editors stated, “Prevarication must cease.” The pro-euro Independent said Brown’s statement had failed the test of “political courage.” A June 10 editorial in the Financial Times said Blair had failed to confront “the most important question facing the country at the start of the 21st century.” It derided Brown’s tests as “bogus” and said “the benefits of euro membership are clear and the barriers are disappearing fast.”

The Sunday Telegraph, meanwhile, in opposing the euro, said the issue was “never really about the economics…. For all the economese jargon…the issue of the British and the euro is really about who we are as a people.” It is, the paper said, “about whether we see ourselves as Europeans. So far, the evidence suggests we do not.” In similar vein Daily Mail columnist Simon Heffer dismissed the economic arguments for the euro as both “speculative and rhetorical” and “irrelevant.” The issue, he said, was that Britain would “not merely lose the readily ridiculed commodity known as sovereignty. We lose a substantial chunk of our democracy.… Nobody will vote for the people in Frankfurt who set the interest rate and the inflation target that governs it.” British interests would be subordinated to “something called the European interest,” the right-wing columnist said.

Representatives of companies based in Britain and their organizations have also expressed conflicting views, in part reflecting the differing pressures on manufacturers engaged in trade and institutions responsible for investment. “The most striking feature of the direction of UK direct investment is that it bears little similarity with the UK pattern of visible trade. The major difference is the greater trade with EU companies, which accounts for 57 percent of all our visible trade,” explains the UK government’s Treasury. Many British companies engaged in European trade and foreign-based companies that invest in the UK as a springboard into the European Union market—such as Ford Motors and Nissan—support Britain’s entry to the euro.

Ford, Alstom UK, BAE Systems, British Telecommunications, Kellogg’s, and Unilver, are among the companies listed as donors to the “Britain in Europe” campaign. These larger capitalists favor a single currency as it would eliminate the costs and risks involved in currency transactions for the goods and services they buy or sell in the eurozone.

But 31 percent of UK investment is with the EU countries. By far the biggest single host of UK overseas investment is the United States, while non-OECD countries in the Third World, especially in Asia and Latin America account for a further 17 percent. Such transactions are conducted in the U.S. dollar. Overseas investment accounts for a relatively high proportion of the GDP in the UK as opposed to other imperialist countries. “The UK’s outward and inward direct investment flows as a percentage of the GDP are more than double those of its nearest competitor,” the Treasury states.

Capitalists that have opposed the euro, include the Federation of Small Businesses and Simon Wolfson, chief executive of Next, a clothing retail chain. The British Chambers of Commerce and the Institute of Directors support a continued delay before euro entry would be considered.  
 
Weakness of British imperialism
This debate reflects the sharpening competition among capitalists as depression conditions unfold and the dilemma faced by the UK rulers caused by the relative weakness of British imperialism. It is becoming increasingly difficult to maintain a strategic alliance with Washington and simultaneously put Britain “at the center of Europe,” as Anthony Blair favors. This creates fissures in ruling circles that don’t neatly correspond to economic interests.

Writing in the Daily Telegraph June 15, the former chancellor in the Conservative government of Margaret Thatcher, Nigel Lawson, described adopting the euro as “a Rubicon which it would be the utmost folly to cross.” Lawson argued that the driving force behind European monetary union was a political project led by the French rulers, with the backing of Berlin, not to create a United States of Europe but “to construct a Europe sufficiently united to create an effective challenge to what it sees (and fears) as the political, economic, and indeed cultural hegemony of the United States.”

Lawson said Blair’s support for the euro was due to the fact that “he appears to believe that, once inside EMU, we could exert a decisive influence over Europe’s role in world affairs that would be unattainable outside it.” Lawson dismissed this view as “implausible to the point of incoherence.” Britain could only play a leading role in Europe if it abandoned its special relationship with Washington, he stated. “As, once again, Iraq showed, Britain is (in de Gaulle’s words) America’s Trojan horse in Europe. Unless Britain were to sign up to the French agenda, to allow the United Kingdom a leadership role of any kind would be to threaten what, as France sees it, Europe is all about.”

Similar divisions in UK ruling-class opinion have greeted the publication of a draft European Union constitution. This was presented at the EU summit in Thessaloniki, Greece, June 20 by former French president Valery Giscard d’Estaing, who headed the drafting convention. The final text of this document is due to be agreed on by EU governments next year. The current draft text proposes a full-time European president, foreign minister, public prosecutor, and finance chief for the eurozone. Both the French and German governments welcomed the document, while Blair stated that it was a basis for “further negotiations.” At stake for the British imperialists in those talks will be the extent to which they maintain a veto over EU decision making as opposed to being forced to accept majority votes. “What we want is a Europe of nations, not a federal super-state,” Blair said. “There is no way Britain is going to give up our independent sovereign right to determine our tax policy, our foreign policy, our defense policy, our own borders,” he added. The opposition Conservatives have demanded a referendum on the issue, which Blair opposes.

In May, after an earlier draft had been published, the Daily Mail began organizing its own “referendum” on the proposed EU constitution. The document would “strip this country of any meaningful control over its own affairs and leave it as little more than a province in the United States of Europe, sweeping away 1,000 years of our history” the right-wing daily shrieked.  
 
 
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