Two years from now, if some ministers have their way, Britain will have made a decision to join the euro and be on the way to implementing it. An event that has always seemed to be in the distant future could be closer than you think.
The timetable that pro-euro ministers envisage is straightforward: an election next spring, then an early government decision in favour of entry. The referendum to which the Government is committed happens during the following 12 months - with many favouring a date some time after January 1 2002, when euro notes and coins replace national currencies.
Referendum approval would accelerate the process. Between two and five years after the decision to join (according to the Government's national changeover plan), Britain could be a paid-up member of euroland.
For Britain, of course, nothing involving Europe is ever this uncomplicated. The circumstances of British entry are, however, now quite easy to envisage. The first requirement is a large Labour majority at the election. Despite recent setbacks in the London mayoral race and the May local elections, Labour's opinion poll lead remains huge. Barring a serious economic reversal, Tony Blair will carry this lead through to the general election.
A strong Labour victory would have two main effects. It would give Blair a big enough majority to ensure House of Commons support for a decision to join the euro, remembering that there would still be some opponents in his own party. More importantly, a heavy defeat for the Tories would be seen as a public rejection of William Hague's anti-euro stance. Even Tory policy could undergo a rethink. Michael Portillo changed the party's position on the minimum wage and Bank of England independence within weeks of taking over as shadow chancellor. Who knows what he could do as party leader?
Second, there has to be enough economic convergence between Britain and Europe for the Treasury to be able to present a passable argument that the chancellor of the exchequer's famous five economic tests have been met. These are: whether entry would be good for investment, jobs and Britain's financial services, whether there is enough flexibility (on both sides) to cope, and whether the British and European economies are sufficiently converged.
The first four are so vague as to be easily fudged either way. The most difficult challenge is to prove compatibility between Britain and the rest of Europe. Even here, however, any reasonably competent economist could come up with a convincing argument on either side.
Suppose that, by next year, interest rates in Britain have edged lower, say to 5.5%, and that the rate set by the European Central Bank has moved higher, to 4.5%. Add in the probability that the pound will have slipped further against the euro, perhaps even below the equivalent of Dm3.0. It would be difficult in these circumstances to conclude that Britain was now fully converged with the euroland economies. But it would be quite easy to argue that entry would not be the disaster that it might have been had Britain joined at the beginning of 1999.
The five tests may not be that much of an obstacle. Gordon Brown has appeared to be less enthusiastic about membership but he has been careful to leave his options open.
That would still leave the obstacle of public opinion. At the latest count, according to Mori, in a poll for Schroder Salomon Smith Barney, opposition to joining is running at 60%, with only 24% supporting euro membership. What could cause the shift in favour necessary to get a yes vote in a referendum?
Opposition to continued British membership of the EEC was running high when Harold Wilson's second Labour government was elected in 1974. By the time of the referendum the following year, with membership supported by all three of the main political parties (although with significant minorities opposing in each case), the yes camp won a comfortable victory. This is what Tony Blair had in mind when he said recently in an interview for an American magazine that he could swing public opinion in favour.
It would need more than the prime minister's charms, however. The biggest requirement for the pro-euro lobby is that the single currency becomes a desirable goal. This means Europe itself has to look good as an area of strong economic growth and falling unemployment. If America were at the same time looking rather bad - a bubble economy gone flat - the task would be easier. The euro itself would also need to have established itself as stable, if not strong.
There is, of course, many a slip between cup and lip. My view is that a decision taken in haste to join the single currency is one we might live to regret for a very long time. Euro enthusiasts argue that the immediate post-election period represents the window for entry and that, if it is missed, it may never happen at all. Either way, we are heading for some interesting decisions.
Visit David Smith's web site: www.economicsUK.com.