GERMAN government ministers yesterday rounded angrily on an opposition leader after he warned that the single European currency could be weaker than the deutschmark.

Mr Gerhard Schroeder, the Social Democrat prime minister of Lower Saxony and a leading contender to challenge Chancellor Helmut Kohl in 1998, told the weekly magazine Focus that his party might block the introduction of the euro if the conditions were not right.

"Naturally the euro will be weaker than the mark. If you put several weak currencies together with a few that are very strong, an absolutely strong currency cannot come out of that," he said.

Mr Schroeder added that the Social Democrats could use their majority in the upper house of parliament, or Bundesrat, to block legislation abandoning the deutschmark in favour of the euro. Accusing Dr Kohl of attempting to prevent a public debate in Germany on the single currency, he warned that the project could prove as expensive for Germany as the process of reunification.

"We transfer up to DM209 billion every year from west to east within Germany. We can't saddle ourselves with more on top of that," he said.

The Finance Minister, Mr Theo Waigel, accused Mr Schroeder of cheap populism and cynically attempting to boost his own political profile. He said the stability criteria for the single currency were clear and promised that they would be respected to ensure that prices and interest rates remain stable.

"This is set out in the Maastricht Treaty which, by the way, has been approved by the Bundesrat," he said.

The Chancellery Minister, Mr Friedrich Bohl, said Germany would profit from the single currency which would act as a motor for faster economic growth throughout Europe.

"Schroeder's panic mongering about the euro is irresponsible in the extreme," he said.

Mr Schroeder's remarks run counter to the position of other Social Democrat leaders, who have called for a more liberal interpretation of the conditions for entry into European Monetary Union.

Meanwhile in London, the Institute of Directors said yesterday that Britain must stay out of a European single currency and not sign up for the EU Social Chapter that governs working practices.

Mr Tim Melville Ross, the institute's director general, said 1997 would be a momentous year for Britain with a general election, approaching and several key decisions on Europe to be made.

"In Europe, we must stay out of the Social Chapter and the single currency," he said. The government has an opt out from a single currency and refused to sign the European Union Social Chapter which guarantees minimum employment rights.

"Ending our opt out from the Social Chapter would give our partners the opportunity to impose additional labour costs on us, so that it will be harder for us to compete, both in Europe and the rest of the world," Mr Melville Ross said. "This must mean higher unemployment, the last thing we need."

He said signing up for European economic and monetary union would also hit Britain's competitiveness.

"A decision to join a single currency in 1997 or at any other time in the foreseeable future would so constrain our economic freedom as to make it virtually impossible for us to compete successfully," he said.

"We must continue to pursue our own independent economic policy within the single market."