Britain's Currency Divide Widens

US is no model for a single European currency, critic says

Opponents of a single European currency have been handed a pithy new guidebook.

In his pamphlet "A Single European Currency: Why the United Kingdom Must Say No," David Heathcoat-Amory combats Europeans who, citing the United States as a model, want to replace the franc, lira, and other currencies with their own version of the dollar.

Until he resigned July 22, Mr. Heathcoat-Amory was Britain's treasury minister, at the heart of the nation's policymaking on a Euro-currency. Two years in the post convinced him that joining in a single currency would be "a disaster" for Britain and that Prime Minister John Major should turn his back on the idea immediately.

"When something is clearly wrong for this country," he writes, "we should reject it."

Heathcoat-Amory's line puts him at odds with government policy, which Mr. Major says is "to wait and see." But the gadfly has supporters, including nearly one-third of the Conservative Party's members of Parliament. They applaud his attempts to show that no useful parallels can be drawn between the US and the the European Union (EU) on the currency issue. (A unified US currency came after political federation, Heathcoat-Amory points out.)

Enthusiasts for a Euro-currency, including most obviously the German government, say its advent will help to trigger European integration.

The pamphlet emphatically disagrees. "The attempt by the EU to reverse this order and introduce a single currency before the creation of a federal state is without historical precedent," Heathcoat-Amory writes.

Nor is he impressed by the argument of his former boss, Chancellor of the Exchequer Kenneth Clarke, that economic integration will iron out differences between EU countries and make it less likely that economic shocks will affect them differently. He points out that, in a single-currency zone, a country experiencing a shock could not devalue its currency, but would have either to rely on migration of labour to less depressed areas, or accept a decline of local wages and prices.

But "mobility of labor is significantly lower within individual European countries than in the US or, indeed, Japan," he says. And "mobility between European countries is lower still," because of differences of language, culture, and social security systems.

Euro-enthusiasts say Heathcoat-Amory's demands will soon be forgotten. Deputy Prime Minister Michael Heseltine points out that early rejection of a single currency would make it virtually impossible for Britain to influence the broader European debate on the issue.

But many Conservatives are worried by their party's dismal showing in opinion polls, aware that a general election is less than a year away. They contend that immediate rejection of a Euro-currency would be electorally popular and open up a clear policy difference between the government and the opposition Labour Party, which is more enthusiastic towards the EU.