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e-News from Britain in Europe and the European Movement FIVE TESTS ARE MET, SAYS NATIONAL INSTITUTE Gordon Brown's five tests for joining the euro have been passed according to a highly respected and independent think-tank. And sharing the common currency will bring lower inflation and higher growth for Britain, according to the National Institute for Economic and Social Research (NIESR). The NIESR's report has examined the Chancellor's five economic tests for joining the euro using the same model that the Treasury will use when it makes its own assessment. That such a well-respected think-tank has concluded Britain is ready to share the common currency and would benefit from doing so has increased expectations that a positive assessment by the Chancellor is likely. The Government has committed itself to assessing the tests before June 2003 and a positive assessment will be followed by a referendum. Given the massive significance of this report, we have decided to devote e-News entirely to this story. The five tests, which the Chancellor will use to assess whether Britain should join the euro, are: 1. Whether there can be sustainable convergence between Britain and the economies of a single currency. 2. Whether there is sufficient flexibility to cope with economic change. 3. The effect on investment. 4. The impact on our financial services industry. 5. Whether it is good for employment. What the report says Convergence The NIESR found that "we have converged" with the euro-zone economies. Furthermore it found that "EMU would give more stable interest rates and inflation rates than we would see outside it." Flexibility According to the National Institute "The UK has become more flexible in the last four years, and so has the rest of the European Union." Investment Investment - which is so important to millions of British jobs - would rise because of the more stable economic environment if we were to share the common currency, according to the report. Financial services Remaining locked out of the euro would be a serious "disadvantage" to the City of London. Locked out of the euro, there could be a "decisive shift [in] the balance of advantage in Frankfurt's favour, and hence staying out could be a major loss for the UK financial services sector." Employment and output The National Institute's model concluded that joining the euro would "increase real wages and employment". The importance of this report cannot be overstated. Over the past five years the Treasury has secured a stable and prosperous economic environment. Using a model that will be used by the Chancellor to assess his tests for joining the euro, the National Institute has concluded that Britain will be even better off if we were to share the common currency. Click <http://www.niesr.ac.uk/press/010502RB.pdf> here for more details of the National Institute's report. Click <http://www.britainineurope.org.uk/le_news.phtml?art_id=50> here for the opinions of senior politicians and economists on the report. © Britain in Europe <http://www.britainineurope.org.uk/> www.britainineurope.org.uk