Britain on Saturday firmly rejected calls to put the pound back into Europes Exchange Rate Mechanism (ERM) ahead of any entry into a future single currency.
Finance minister Gordon Brown said such a step was not needed. Our position is clear. We have no intention of rejoining the ERM, he told reporters after a meeting of European finance ministers.
Britain has opted out of joining the single currency at its launch in January 1999, but wants to join in the future if it is in the best interests of the economy.
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The Maastricht Treaty, which sets out the convergence criteria for membership of the single currency, states that countries must have respected the ERM fluctuation bands for two years before qualifying.
But Britain has argued that since the bands were widened dramatically in 1993, this condition is meaningless. It has said that instead, two years of currency stability should be enough.
The issue over Britains refusal to rejoin the ERM seems set to grow next week when the European Commission, the EUs executive arm, publishes a report on which countries meet the criteria for monetary union.
The report is likely to exclude Sweden from joining the single currency on the basis that it has not been a member of the ERM for two years, despite the fact the countrys Parliament has voted not to join.
Greece which wants to join EMU as soon as possible long held a similar view on the exchange rate grid as Britain and Sweden, but last week changed tack and joined the ERM in order to qualify for EMU by 2001.
Opposition to Britains view remains resolute. On Saturday, French central bank governor Jean-Claude Trichet said he believed two years in the ERM was clearly spelled out in the Maastricht Treaty.
The legal experts tell us that it is one of the Maastricht Treaty criteria, he said.
Britain has strong political reasons for staying out of the ERM. The pound buckled under a weight of speculative cash in 1992, with the onslaught being led by George Soros, and stumbled out of the grid. The government, blamed membership of the ERM and the high interest rates it had stuck to for pushing the countrys economy into the worst recession since World War II.