Six years after taking office on a pro-European ticket and four years since the launch of Europe’s common currency, Britain’s Labour government said it still wasn’t ready to scrap the pound and adopt the euro,” writes Marc Champion in today’s Wall Street Journal.

“In a long-awaited decision the British government has described as the most important it faces, Chancellor of the Exchequer Gordon Brown said only one of the five economic tests he set back in 1997 as conditions for calling a referendum on joining the 12-nation euro-zone had been passed.”

“Mr. Brown left the door open to revisit the question next spring, however, and said the United Kingdom’s economy had made ‘significant progress’ toward passing the five tests since they were last assessed six years ago. He proposed a series of economic changes aimed at making it easier to pass the tests in the future.”

” ‘The euro game is clearly on,’ said Lord Marshall, chairman of the pro-euro lobby ‘Britain in Europe’ and of British Airways. ‘We are delighted the government has now started its campaign to explain how the euro would be good for business, for families, and for Britain.’ “

“Others, however, were more skeptical after years of listening to positive speeches from the government, only to find practical steps toward a referendum on joining the euro barred by Mr. Brown’s five tests. They noted that the reforms Mr. Brown has proposed are structural, and, if serious, would take years to implement.”

“Whether the U.K. joins the euro has significant implications both for the currency zone and for the U.K. itself. If Britain were to join, its economy would account for about one-fifth of the total euro-zone economy, according to Mr. Brown. That would add significant weight to a currency with ambitions to be the world’s leading reserve currency.”

“Currently, however, British membership could also make it harder for the European Central Bank, which sets the euro zone’s monetary policy, to reduce interest rates — causing potential problems for Germany’s already flat economy, economists say. The base interest rate in the U.K. is 3.75%, compared with 2% in the euro zone.”

“Within the U.K., however, debate has focused mainly on the potential effect on Britain’s economy. Among 18 economic studies Mr. Brown published to support his decision Monday, one claimed that adopting the euro would raise trade with other euro-zone countries by between 5% and 50%, potentially increasing the U.K.’s per capita gross domestic product by as much as £1,700 ($3,307 or 2,826 euros) over 30 years.”

http://online.wsj.com/article/0,,SB105514695858823800-email,00.html