Britain is more open to joining the euro zone and closer to making the move as a result of the global financial turmoil.
Britain closer 'to adopting euro'
Britain is more open to joining the euro zone and closer to making the move as a direct consequence of the global financial turmoil. Jose Manuel Barroso, the European Commission president, said some British politicians had told him they were "now closer than ever before". "I'm not going to break the confidentiality of certain conversations, but some British politicians have already told me, 'if we had the euro, we would have been better off'," he told a French radio news programme, referring to the fall in the pound's value since the markets and liquidity meltdown earlier this year.
"The British have an enormous quality, one of many, that is they are pragmatic. This crisis has emphasised the importance of the euro, and also of Britain." He was not suggesting Britain could join the euro club promptly. "I don't mean this will happen tomorrow, I know that the majority [of British people] are still opposed, but there is a period of consideration underway and the people which matter in Britain are currently thinking about it."
Mr Barroso pointed to the case of Denmark, another EU state that has so far refused to accept the euro but is now planning another referendum on the single currency. The Danish voted against joining in 2000. A Downing Street spokesman said the government's position on the euro had not changed and it had no further comment, according to the BBC. The UK's opposition Conservative Party opposes the country adopting the euro.
The shadow foreign secretary, William Hague, said it was "extraordinary" that ministers were talking to the EU about joining the euro "behind the British people's backs". "Keeping the pound is vital for Britain's economic future. We need interest rates that are right for Britain, not the rest of Europe. There are no circumstances in which the next Conservative government will propose joining the euro.
"If Labour ministers still want to get Britain into the euro they should come out and say so. We will be putting questions to the government to find out what conversations have been going on." There was more gloomy economic news for Britain yesterday. British manufacturing activity contracted at a record pace last month as new orders collapsed, a survey found, stoking expectations that the Bank of England may cut its benchmark interest rate by a full percentage point later this week.
The manufacturing purchasing managers' index from the Chartered Institute of Purchasing and Supply (CIPS) came in at 34.4 for the month, way below October's downwardly revised 40.7 and below expectations. The reading was the lowest and the biggest one-month fall since records began in 1992, and indicates that manufacturers are being hit hard by depressed domestic demand and falling exports despite the sharp decline in the value of the pound. A reading below 50 indicates contraction and the bigger the difference, the greater the drop in output.
Vicky Redwood, an economist at Capital Economics, said the survey was consistent with manufacturing output contracting at an annual rate of about 10 per cent. Manufacturing accounts for about 15 per cent of the British economy. "The severe deterioration clearly supports the case for another large cut in interest rates later this week," she said. Other housing data from the Bank of England yesterday reinforced expectations that the bank will cut interest rates by another percentage point today to 2 per cent, which would be the lowest since 1951. Last month, the bank slashed interest rates by 1.5 percentage points as expectations rose of a deep recession and the growing possibility of deflation.
The Bank of England said that the number of mortgage approvals fell another 1,000 in October to 32,000, equal to the lowest in the history of the series. The number of loans for house purchases are about 75 per cent below their peak. * with agencies