Economists are divided on the euro

Iain Duncan Smith has broken his self-imposed silence on the euro with a speech restating his opposition to UK entry into the single currency.

The Tory leader also challenged Tony Blair to "call a referendum now and find out exactly how the British people feel about the euro".

The move comes ahead of Chancellor Gordon Brown's verdict on the Treasury's five economic tests widely expected within the next few weeks.

Mr Duncan Smith branded the tests a "sham" saying that only meaningful test as far as the prime minister was concerned was: "Can he win a referendum?"

The speech in London at the Foreign Press Association coincided with a report by the pro-single currency group Britain in Europe which warned of the dangers of keeping the pound.

The report claimed not joining the euro would have a negative impact on the UK economy with lower wages, higher prices and weaker UK financial markets.

The UK's five euro tests History of the euro

Ex-foreign secretary Robin Cook is also urging the prime minister to be "bold" on the euro.

Mr Blair should announce a firm timetable to join the currency club by January 2007, the former foreign secretary writes in an article in the Independent newspaper.

The prime minister has set a 7 June deadline for Mr Brown to deliver his judgement on the five economic tests of whether euro entry is in Britain's interests.

The chancellor is widely expected to say no to entry, without ruling out the possibility of a referendum on the issue before the next general election.

Tests "a sham"

Mr Blair, generally seen as more pro-euro than his chancellor, has promised a referendum if the tests are passed.

The Tory leader believes that whatever the chancellor's verdict, the government is unlikely to rule out joining the euro for any sustained period.

For foreign investors the uncertainty caused by our prevarication is highly problematic Siemens chief executive Alan Wood and Dyson and Healey & Baker company heads

That decision would come despite Mr Duncan Smith's contention that like the Tories, most people in the UK think joining the euro would be bad for Britain.

He said: "The Conservatives would not take Britain into the euro.

"Quite simply because we believe that surrendering our ability to set interest rates according to our economic needs would be bad for British jobs, the British economy and the British people."

Mr Cook believes Mr Brown should heed the warning of 11 international economists who publish the results of a six-month study on Tuesday.

He argues that even if the chancellor decides that his tests are not met, Mr Brown must send out a message of positive intent as far as Britain is concerned.

Mr Cook writes: "Gordon Brown should say something like this: 'This government understands that Britain's economic prosperity and political standing would be best served by membership of the euro.

"'We therefore commit ourselves to making it possible for Britain to join the euro in January 2007.

"'To the extent that our economic tests are not met today we undertake to make it a priority of our economic strategy to ensure that they are met by then.

"'We will put the case for the euro with vigour and convcition to the British people in a referendum from that date.'"

In Britain in Europe's report, the pro-euro group argue that the UK will lose inward investment and political influence unless it signs up to the single currency.

Lost opportunity?

The report, The Consequences of Saying No, says: "Even temporary delay may fail."

And it warns Britain may not be able to join later under more favourable economic circumstances.

Chairman and Imperial College Business School principal Professor David Begg said any delay would reduce British influence on crucial EU changes.

The report says Britain's share of inward investment in Europe has already fallen sharply.

Some City of London financial businesses have already moved to euroland, it adds.

And trade in the eurozone has increased by up to 30%, making the nations within it more competitive, according to the report.