George favours rate of euro

OUTGOING Bank of England Governor Sir Edward George said the pound’s current level against the euro is closer to an acceptable rate for Britain. to adopt the European common currency.

The level “is certainly closer to an acceptable rate,” the central bank governor told the BBC.

“I wouldn’t like at this stage to make a judgement as to whether it’s acceptable but it’s certainly moved in the right direction.”

A year ago, he said the strength of the pound was an “immediate obstacle” to euro entry.

The euro has gained about 7% against the pound this year. The currency traded at 69.65p against the euro on Friday.

A Treasury study written by Exeter University professor Simon Wren-Lewis this month said the euro should strengthen to at least 73 pence before Britain joins.

British Chancellor Gordon Brown on June 9 ruled out a referendum on the euro this year, saying Britain’s economy is out of step with that of the dozen euro nations.

Last week, he said there would be no “fudge” of the decision on euro membership, indicating he’ll only consider another assessment next year if he thinks the economic conditions are right.

Mr Brown was last week backed by Sir Edward, who retires at the end of this month after 10 years at the helm of the Bank of England. Given the risks to the global recovery, “including the risk of slow growth in the eurozone, particularly in Germany, I agree with your assessment that the economic case for euro entry has not yet been made.”

The outgoing central bank governor said today he would have been “quite surprised” if Mr Brown had given a “straightforward yes” to euro membership.

Of the Treasury’s five economic tests, only the one that assessed whether joining would benefit London’s financial district was passed.

Like Mr Brown, Sir Eddie stressed the importance of the two tests on convergence and flexibility being met. The other two tests assess the benefits for investment and the impact on the British labour market.

Prime Minister Tony Blair has said the euro is Britain’s “destiny” and that it would be “a shame” not to eventually share a currency with the country’s biggest trading partners.

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