The prospects of Britain joining the euro in the near future receded further yesterday, when Mr Gordon Brown, UK chancellor, clashed with EU colleagues over his spending plans.Some ministers implied Mr Brown should raise taxes or trim his programme to rebuild public services, because it risked breaching EU budget rules.
The chancellor left the meeting early without talking to reporters, but his aides made it clear he had no intention of heeding the warnings.
Opponents of the euro are likely to use the dispute as proof that Britain's fiscal room for manoeuvre could be strictly limited inside the single currency zone. Weakening economic growth, coupled with Mr Brown's huge investment programme have led to a rise in Britain's budget deficit.
He argues Britain should be allowed to run small deficits in the medium term because its public finances are strong, with low levels of national debt and minimal pensions liabilities.
But the monthly Ecofin meeting of EU finance ministers agreed to strike out a paragraph in a draft text that said it was fine for Mr Brown to run small deficits in the medium term.
The final Ecofin statement on Britain's budgetary position notes that the deficit would remain at around 1.5 per cent of GDP in the medium term; the EU's Stability and Growth Pact says the deficit should be "close to balance".
"Consequently the council recommends that the UK authorities should aim for a medium-term budgetary position which is in line with the close balance requirement of the Stability and Growth Pact," the statement says. - (Financial Times Service)
