Blair: We can't rush into euro

TONY BLAIR has admitted that the pound is riding too high for Britain to rush into the euro. The Prime Minister warned that the level of sterling will be 'an issue' when the time comes to decide whether to enter the single currency.

His words will be seen as a clear sign that he is cooling on the idea of a snap referendum early next year. Chancellor Gordon Brown's chief economic adviser, Ed Balls, has already warned that it will be impossible to go for a fast-track entry because of the high value of sterling against the euro.

It is the first time that Blair has so explicitly acknowledged the importance of getting the exchange rate at the right level before taking the momentous plunge into the new system.

His remarks were made as he flew into Singapore on the way home from the Commonwealth summit in Australia. The Prime Minister said: 'There is an issue about the exchange rate when you come to the decision, but that is for the future.' Blair said he agreed with Balls when he argued that Britain has too often put political expediency before economic prudence when making key decisions in the past.

The Premier's intervention will worry Europhiles in the Government who are pushing hard for a referendum as early as next May.

Europe Minister Peter Hain in particular has piled on the pressure for a quick referendum. His enthusiastic remarks to a French newspaper last month were widely seen as a signal that the Blair camp was pressing Brown for early entry.

But on Tuesday Blair effectively slapped down the Europe Minister as he sided with the much more cautious Treasury view. The Premier said he backed the remarks of Balls, who hinted strongly that entering the euro on Hain's rapid timetable could damage the economy.

Speaking at a London seminar, Balls said that Britain had, throughout history, made the mistake of putting political convenience before sensible economics.

His words were a scarcely-veiled reference to the Tory Government's disastrous decision in 1992 to rush into the European exchange rate mechanism at too high a level. The move led to widespread redundancies, company closures and home repossessions.

Asked if he agreed with Balls's comments, the Premier insisted that he did. He said: 'I read what he said and I have said the same things in the past myself, which is that the economics are important.' He said that was 'precisely why' the Government had set five economic tests for entry and added: 'I have always said they are not some kind of political camouflage - they are real.'

Blair had only highly-qualified backing for Hain's remarks, however. Asked if he thought Britain would be ready for a referendum on the timetable set out by the Europe Minister, he replied: 'No decisions have been taken on this for obvious reasons because the economic assessment has not been made. I think what Peter was pointing out perfectly sensibly was that the assessment has got to be made within two years of June 2001.'

Asked if the referendum could be held next year, Blair left his options open. He said: 'I am not going to speculate on it because we will get to that in due course.'

The Premier was equally cautious when asked if he thought public hostility to joining the euro would subside. He said: 'The euro is a reality, that's clear. I think people will watch to see whether it's in their interests to do it.'