Peter Mandelson sparked fury yesterday when he let slip that ditching the pound in favour of the euro remains an “important objective” for Labour.
Speaking in Berlin, Lord Mandelson insisted the euro had been a great success during the global downturn.
The obsessively pro-Europe First Secretary of State’s comments caused widespread alarm at Westminster, especially as Labour has repeatedly failed to honour its manifesto pledge to hold a referendum on the European treaty.
In a revealing insight into Government thinking, Lord Mandelson, who was yesterday sworn in by the Queen as Lord President of the Privy Council, said: “Does it remain an important objective for Britain to clear that the euro has been a great success in anchoring its eurozone members during the financial crisis.
“I hope people will recognise that this represents a major vindication for the single currency.”
The Daily Express recently revealed that the EU’s top official said the UK was “closer than ever before” to entering the single currency. Commission President Jose Manuel Barroso added that the “people who matter in Britain now want to join the euro”.
Those people obviously include Lord Mandelson. Shadow Foreign Secretary William Hague yesterday described his comments as extremely alarming.
“It is deeply disturbing that the man who now makes most of the Government’s policies has declared that Britain should join the euro,” he said.
“The fact is that if we had scrapped the pound interest rates would have been lower in the boom and would now be higher.
“Under the euro, Gordon Brown’s boom and bust would have been even deeper.
“Lord Mandelson’s failure to learn this lesson shows how bereft Labour are of fresh thinking. This Government is stuck in the obsessions of the past. There are no circumstances in which the next Conservative government will propose joining the euro.”
The money markets reacted quickly to Lord Mandelson’s comments, knocking almost two cents off the value of the pound against the US dollar. The pound was also down against the euro.
There was criticism of Lord Mandelson’s claim that the euro had shielded its members from the worst of the recession. Derek Scott, a former economic adviser to Tony Blair, insisted it was nonsense to see joining the euro as improving Britain’s prospects.
“Eurozone membership is not the answer,” he said. “We’re seeing German output falling by six per cent and Spain’s unemployment heading for 25 per cent – definitely not success stories.”
Britain’s most recent figures show the economy shrinking by a disastrous 4.1 per cent. But the eurozone is faring even worse at 4.8 per cent.
It is not the first time Lord Mandelson, who served four years as Britain’s EU Commissioner in Brussels, has been at the centre of a row over the single currency.
But the long-time enthusiast for European integration now has unprecedented influence over a badly weakened Prime Minister.
Number 10’s official policy on the euro remains unchanged – that a clear and unambiguous case for UK membership has not at the present time been made.
Ministers have also repeatedly insisted that there would be a referendum on joining up.