Over the last week there has been a definite shift in the British government's attitude towards joining the euro. The prime minister, Mr Tony Blair, signalled in an interview that it would be a "betrayal" to stay out of the single currency for political reasons.
He confirmed that to join it would achieve one of his major political objectives. Polling research by those close to him shows a clear narrowing of popular opinion in favour, which would be stimulated further by a government decision to recommend a Yes vote if a referendum is held next year.
All this stands despite the now ritual insistence by the chancellor, Mr Gordon Brown, that nothing can be decided until the five economic tests covering convergence, flexibility and the impact of euro membership on jobs, investment and the City of London are met. Speculation that there has been a political agreement between the two men to go ahead with a referendum next year is firmly denied by the Treasury. Mr Brown is worried that this should be seen to override an economic judgment. If convergence is not achieved, it will be much more difficult to convince a still reluctant electorate to vote in favour - and Mr Brown has his own good political reasons to avoid a rebound arising from a mistaken decision to join the currency.
Markets have begun to move in response to this news. That is as much to do with economic conditions as with the timing of Mr Blair's remarks. Sterling's strength has been related to that of the dollar and to the weakness of the euro. Yesterday saw a continuing adjustment in their relative values, as the dollar fell on worries about the US economy and asset market valuations. There is a general assumption that the euro remains undervalued and that sterling's value against it would come down if a serious effort to bring the UK into the single currency is under way. The rate of sterling's entry to the euro would nevertheless have to be negotiated, with current expectations suggesting a possible value of 65 pence to the euro.
Ireland has a vital interest in this issue. The combination of the weak euro with the strong dollar and sterling has conferred a competitive advantage on Irish exporters which would be reversed if they readjust. In the longer term, Ireland, as the UK's largest per capita trading partner, must pay the closest attention to the value at which sterling might join the euro. It is very much in Ireland's interest that it should do so, since this would stabilise what is likely to remain our most important economic relationship. North-South economic development, too, remains uncertain until the question is resolved.