UK-euro delay: Angst or economics?

UK Prime Minister Tony Blair: "If (the economic tests) are met, we should join"

By CNN European Political Editor Robin Oakley

LONDON, England (CNN) -- Is it really concern over whether Britain's economy power is ready to join the euro that is keeping Europe's second biggest economy hovering on the sidelines?

Or is it nationalistic fears that the country's traditions and sovereignty may be at risk?

A former chancellor of the exchequer who wants Britain in the single European currency has few doubts:

"There's a big political hang-up because the euro-sceptical faction of opinion in this country has used the single currency as a symbol to whip up all the old doubts about Britain's relationship with Europe," says Conservative Kenneth Clarke.

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"We're going through one of those periods of angst and neurosis about our national identity and our role in the world in which the British have really indulged on and off since the Second World War."

Pledging to "Save the Pound" didn't do much for the Conservative Party, which crashed to defeat at the last election.

But with opinion polls showing two-thirds of the population on their side, anti-euro groups like the Democracy Movement are convinced they can win the referendum that the British people have been promised if the government decides to recommend euro entry.

"The prime minister talks about no constitutional objections to Britain joining the euro. He talks about it being an issue of prosperity," says Russell Walters of the Democracy Movement.

"But the fact is the euro can't work without even more layers of European political integration because you can't make those transfers between economies that aren't working properly. It's two-fold. It's not going to bring prosperity, and it's part of a political project the British people don't want."

Prime Minister Tony Blair, a passionate pro-European, backs the euro in principle. But he's held up recommending entry, waiting for economic tests to ensure Britain is ready.

"They are not window dressing for a political decision," Blair told a recent Labour Party conference. "They are fundamental. But if they are met we should join; and if met in this Parliament we should have the courage of our argument to ask the British people for their consent in this Parliament."

Blair's chancellor of the exchequer, Gordon Brown, applauded that sentiment at the conference. He didn't have much option. But MPs believe he's not as keen and is holding back Blair on the euro.

"Brown thinks it just bedevils the life of the government and you should just shut up about it altogether until he, Brown, declares that it's the right time to hold the referendum," Clarke says.

Blair is confident he can win the argument and persuade Britain's voters to accept the euro once the government has decided to go in.

Euro opponents say there's no evidence of any penalty to the British economy for staying out so far. Euro enthusiasts, however, argue that Britain is losing clout by not being part of the European Union's biggest project yet.

But the longer Blair holds fire on his decision, the harder it's likely to be to turn public opinion.