Britain's Chancellor of the Exchequer Mr Gordon Brown declared today that economic conditions were not in place to allow Britain to join Europe's single currency but left open the door for a further review within a year.
He pledged to look again at the case for euro entry in 2004 and said, if it was made, the British government would hold a referendum to give the British people a final say.
Mr Brown told parliament that he could "make a further Treasury assessment of the five tests which, if positive next year, would allow us at that time to put the issue before the British people in a referendum".
"Membership in a successful single currency would be a benefit to the British people as well as to Europe," Mr Brown said.
"It is a decision of far-reaching consequence, indeed -- because it is irreversible -- one of the most momentous economic decisions our country has to take."
Mr Brown's long-awaited verdict means the pound will survive for now while Britain's soul-searching over Europe continues.
The tests could be re-examined early next year and, if positive then, would lead to a referendum, he added.
"The government's view is that if the economic case is clear and unambiguous, then the constitutional issue, while a factor in the decision, should not be a bar to entry," Mr Brown said.
"If on the basis of the five economic tests, membership of the euro is shown as good for sustaining British jobs, British business and British future prosperity, then it is economically right and in the national interest to join."
Mr Brown and Prime Minister Mr Tony Blair were to give a joint news conference today to hammer home that message and quash speculation of differences between them.
Analysts say the euro verdict is a carefully concocted compromise between Mr Brown's fear of jeopardising his domestic economic record, and Mr Blair's belief that Britain's "destiny" is to adopt the currency and take a place at the heart of Europe.
If it does go to a referendum, the government would face a hard battle convincing a sceptical public.
Polls show two-thirds of Britons want to keep their pound, fearing an erosion of sovereignty without it.
Studies released by the British Treasury earlier today highlighted the key obstacles to Britain joining the euro now.
Running to over 1,700 pages, they said Britain's housing market made it more sensitive to interest rate changes and that progress on labour market flexibility in the European Union lagged the UK and had been slow to pick up.
They also said Britain's economy remained more in tune with that of the United States than the EU. On the positive side, the studies said there were clear potential benefits in terms of greater trade with the EU, should Britain swap currencies.