A test of time the euro can only fail

TAKE a time machine trip back to the spring of 1988, the high noon of Nigel Lawson's balmy boom. Swig Mexican lager from the bottle and sing along with the big hit-makers of the time.

Prefab Sprout, Aztec Camera, Bananarama, Paolo Cecchini. Paulo who? Wasn't he that trendy fashion designer? In a manner of speaking. Cecchini was the economist asked by the European Commission to put a figure on the benefits that would flow from the planned creation of a single European market by the end of 1992.

Cecchini obliged and in May 1988 his report declared that, in the medium term, the tearing down of trade barriers among European Union countries would deliver truly staggering gains for the economies involved.

There would be a one-time boost to Gross Domestic Product of up to 7%. And between 1.8m and 5m jobs would be created. Commission vice-president Lord Cockfield (remember him?) beamed with pride. 'We are on the move,' he declared, gloating over the 'immense opportunities' presented by Project 1992.

Now, 'medium term' is a slippery concept, but one might have thought that, ten years on from 1992 and 14 years on from Cecchini, we could finally judge the accuracy of those glowing forecasts. So how did it go? 'By 1996, the boost to GDP was just 1.5% and just 1m jobs had been created.

'Now it is 2002 and there is little to suggest that we have realised even half the potential gains of the single market.'

Says who? Well, that was Treasury Minister Ruth Kelly, commenting recently on the realisation (or not, in this case) of Cecchini's goldplated predictions. She was too polite to say so, but the fact is that the Cecchini forecasts were about as reliable as all of those official figures of yesteryear ' proving' that East Germany had the fifth-biggest economy in Europe or that Castro's Cuba was a Caribbean paradise on earth.

For all its tables and ' methodology', the report was little more than propaganda, mixed with a heavy dose of bureaucratic wishful thinking. That was then, of course, and we have 'moved on'. But there are three critical lessons to be learned from the utter failure of the single market to deliver on its big-talking promises.

First, Project 1992 was almost entirely uncontroversial: a great chorus line of worthies, from Lady Thatcher to Sir Edward Heath, Neil Kinnock to Lord Young, stepped through the same thigh-slapping routine as they cheered to the rafters the greatest economic show on earth.

Only a handful of (highly courageous) oddballs declared either that the 'benefits' had been hallucinated into existence by power-hungry Eurocrats or that no amount of additional GDP could compensate for the surrender of the British veto in Brussels as majority voting was brought in - ostensibly to 'complete' the single market.

By contrast, British membership of the single currency is enormously controversial. What is more, there is not and never has been any Cecchini-style report lauding the huge 'gains' to be reaped from the euro. True, Commission President Jacques Delors did present his own report on economic and monetary union, 11 months after Cecchini.

But no numbers were ever put on the 'payback' from European Monetary Union (EMU): Delors simply accused those who opposed it of being 'the sorcerer's apprentices' - Delors-speak for fascists, racists and anyone else unpleasant he could think of.

Thus, in order to get the British public to swallow the gnat of the single market, a lavish coating of synthetic syrup was applied, in the form of Cecchini. To get them to swallow the camel of abolishing the pound, there is not a spoonful of sugar in sight.

Second, as Kelly's remarks make clear, the Treasury is well aware that Project 1992 was sold on a false prospectus. It is even more acutely aware that British membership of the euro is being sold on practically no prospectus at all, merely a vague collection of 'threats' about Britain 'being left out'.

And it is the Treasury that has to assess the desirability or otherwise of that membership. Knowing what it does, how can its verdict be anything other than a big thumbs down?

Third, May 1988 was, relatively speaking, an age of innocence. The wobbly bridge linking Project 1992 with the euro - the Exchange Rate Mechanism - had yet to throw a million Britons out of their jobs and out of their homes.

White Wednesday was still four years away. It was still - just - excusable to believe that Project 1992, the ERM and EMU represented a shining path to the 21st Century.

There is no excuse now. Indeed, a 'yes' from the Treasury would be the crowning disgrace for the department that gave us the Lawson boom, the ERM, rail privatisation and the farcical public/private partnership and has been wrong on just about every single issue since the First World War. Assessing the euro is a Treasury 'test' in more than one sense.