GORDON Brown's "courageous" decision to hand control of interest rates over to a quango headed by the Bank of England is a crucial preparatory step along the road to European monetary The rules of admission to EMU include the establishment in each member state of an independent central bank, which can then be made subordinate to a Euroquango, the European Central Bank.
In Britain, the Bank of England has been controlled by the government since Labour nationalised it in 1947. Brown's effort to step back from control is a prelude to legisiation which would be required to establish its complete independence if Labour goes for entry to the single currency.
The European Bank will effectivelv control the economies of member states by dictating interest rates and vetting the various policies implemented by governments.
Its powers are reinforced by sweeping powers for the EU to levy massive fines on member states which exceed agreed limits on public sector spending and the level of national debt.
The political crisis unteashed in Germany by the Bundesbank's dash with Chancellor Helmut Kohl gives a foretaste of the likely role of the European Bank.
Kohl, the most eager proponent of the single currency among the major economies, was keen to cut Germany's burgeoning public sector deficit without further austerity measures: nis tinance minister obediently suggested revaluing the German gold reserves, and using the extra cash as a one-off boost to the budget.
The Bundesbank denounced the manoeuvre, throwing a spanner in the works of the convergence process, and triggering a crisis in Kohl's fragile governing coalition.
If Germany's right wing government can be caught in such a crisis, what hope would there be for a socialist government seeking to implement progressive policies if a single currency is ever introduced?