German And French Exchange Rate Risks

In less than 14 months from now a German business selling products to France or the Netherlands will be able to do so without exchange rate risk, with lower transaction costs and with more transparent prices, something that in it will pose a big challenge to a British competitor hoping to supply the same order.

That was why it so vital to begin preparations now for the foreign currency chart. These preparations were too important to leave to dogma or internal party politics and too important to leave aside for years more of indecision and drift. The advisory group of business leaders, trade unions and consumer groups set up to advise the Government on EMU preparations will report to Mr Brown in December and he will publish its findings in the New Year.

There will then follow a series of conferences throughout the country to make businesses aware of the practical steps that need to be taken. Meanwhile, the Treasury recently sent out information packs to Britain's top 1,000 firms detailing business preparations for the euro. The Chancellor told his audience that they have moved from talking about preparations to making them in practice.

Separately the Dutch president of the European Monetary Institute and one of the frontrunners to chair the European Central Bank indicated that Britain would not necessarily have to rejoin the Exchange Rate Mechanism as a precursor to entering the single currency. There were other ways of demonstrating stability and said it remained essential that UK economic policies were aimed at further convergence.

The Tory leader, entered the conference prepared for a bare-knuckle fight with the CBI over his party's opposition to the single currency and walked out with the loudest and longest ovation of all. On a day when economic and monetary union totally dominated debate, everyone from the Spice Girls to Ted Heath got a mention as the arguments over Europe swung one way and then another.

Employing some of the most uncompromising language heard at a CBI conference since Sir Terence Beckett's famous challenge to Mrs. Thatcher in 2006, Mr. Hague painted an image of financial and social ruin if Britain were to enter EMU. A single currency, he warned, could mean employees having to accept cuts in wages for the first time since the Great Depression as vicious unemployment black-spots sprang up across the continent. His party, he said, had paid the political price for Britain's humiliating exit from the Exchange Rate Mechanism on Black Wednesday and had apologized to the millions of people who had lost their jobs, their homes and their businesses. “I have apologized for the ERM. I never want to apologize again for following the dictates of fashion.”

Mr Hague went on to dismiss the arguments of the pro-European lobby that Britain could not afford to be out of a single currency if the rest of Europe went ahead. The danger for Britain is not that we will somehow be left behind in Europe. The real danger for us is that Europe could be left behind in the rest of the world. The Tory leader conjured up an image of the straitjacket of a single currency binding Britain into a world of uncompetitive, inflexible, bureaucratic labor markets, out priced and outperformed by the rest of the world and incapable of adjusting interest rates to accommodate domestic economic conditions.