The British government yesterday denied changing its policy on a single European currency but markets still speculated that Britain was closer to signing up to Economic and Monetary Union. On the eve of the Labour Party's annual conference, the finance minister, Mr Gordon Brown, and foreign secretary, Mr Robin Cook, both rejected speculation that the government was about to make a new statement on Britain's EMU intentions.
Mr Brown described as "nonsense" a report in one Sunday newspaper that the government would call a snap referendum on signing up the single currency.
The ministers were speaking after financial markets surged on Friday in reaction to a Financial Times report which said the government had become keener on EMU and that an announcement was due shortly.
Mr Brown told BBC Television that Britain would make an announcement on its EMU intentions at the "appropriate time ... about the turn of the year".
He repeated there were formidable obstacles to Britain joining EMU and said it was very unlikely Britain would be among the first group of countries joining EMU at the start of 1999.
Mr Cook took the same line but he repeated his view: "If the single currency proceeds and if it is a success, then in the longer term Britain could not stay out. But that is in the longer term, it is not a little after.
"The position on EMU has not changed since we came into government," Mr Brown said.
Over the weekend, British newspapers speculated over whether the Financial Times article reflected a genuinely more positive stance on EMU or had just been released as a trial balloon to test the reaction of ordinary people and financial markets.
But there is a growing consensus among analysts in the City of London that the likelihood of Britain joining EMU earlier rather than later has increased.
This reflects the new momentum for EMU within Europe which has taken hold after fears only months ago that the whole project was in jeopardy with even Germany unlikely to fulfil the conditions for membership.
"I think there is no doubt that the government is looking for the earliest possible opportunity to join. But, given the constraints, that is realistically January 1st, 2000," said Mr Gerard Lyons, chief economist at DKB International.
Mr David Marsh, director of European strategy at Flemings Bank, said of the government: "They do want to portray a warming up ... towards Europe."
The Labour party had been much more equivocal about EMU before the May 1st election took Prime Minister Tony Blair to power with a landslide majority.
Britain is now playing EMU catch-up, Mr Marsh said. The more positive Britain is now about Europe, the more credible a hearing Britain will get from its EU partners, he added.
Britain takes over the six-month rotating presidency of the EU at the start of next year.
Mr Marsh thought markets today might look at the latest developments in a "slightly cooler way" after the euphoria which sent stock and government bond prices soaring and the pound tumbling on Friday.
But the reaction could be muted. Mr Marsh said bond prices had looked cheap before the Financial Times report and that the pound had certainly been overvalued earlier.
The FTSE 100 share index rocketed by over 160 points to a record high on Friday and the pound fell by four German pfennigs to 2.83 marks.
Mr Richard Jeffrey, head of research at Charterhouse Tilney, said that following Mr Brown's comments the markets might not be quite as convinced as they were on Friday of the official line on EMU. The markets had overreacted, he said.
