We cannot delay the EMU decision much longer

However hard the Prime Minister tries to bury the European monetary union issue, it refuses to disappear. According to the well informed Phillip Stephens of the Financial Times, the Chancellor fears that the Prime Minister might "do the dirty" on him before the election. The fear is that John Major will rule out sterling's participation in the first round of EMU at a moment when it is too late for Kenneth Clarke to resign, perhaps even during the election campaign itself. This is probably why the Chancellor is raising the stakes now, thus ensuring that an election-losing row would inevitably ensue if Mr Major tried to play this card at the eleventh hour.

Wilder theories are also circulating. For example, some are suggesting that Mr Major might quite soon announce that the UK will not participate in the first round of EMU, with the express intention of actually forcing Mr Clarke to resign. A new Chancellor would then introduce a blatant tax cutting Budget, and the Prime Minister would call an immediate election on a low-tax, anti-Europe, ticket.

Anyone who believes this latter fantasy will believe almost anything. But the fact that it should be seriously suggested demonstrates the extent of the gulf between those who believe the UK should pursue ever-closer political and economic links with the EU, and those who believe we should stand aside as the rest of the EU moves towards federation. The timing of the EMU question is only the latest demarcation line between these two implacably opposed groups.

Pro-Europeans like the Chancellor are ready to end their political careers rather than see the Tory Party fighting the next election on a "save our sterling" ticket. They believe this would effectively determine the direction of the party for the next five years, and even settle the succession after John Major. Therefore, they are determined to maintain that Britain's options must be left open at least until 1998.

But the tenability of the Chancellor's position depends importantly on the precise date at which the UK has to inform the rest of the EU of its decision on monetary union. If this is indeed as late as the spring of 1998 - when the membership will officially be sealed, according to a decision taken at last year's Madrid summit - then the pro-Europeans can readily argue that it is in the UK's interest to delay a resolution of this fight until well after the election. More information will be forthcoming by then, so why act before this is available? If, on the other hand, the decision will have to be taken much earlier - say by next summer - it becomes much less credible to argue for a delay until after the election.

So when is the decision really needed? The Maastricht Treaty says that the UK "may" inform the Council of its decision to opt into EMU by 1 January 1998. Although this was probably intended by the drafters of the treaty to be a final deadline, the use of the word "may" is rather odd, and clearly leaves a loophole to notify later if the UK chooses. Presumably, the latest possible date would be March or April 1998.

However, it will not be possible for Britain to spring this decision on the EU, without having taken several preparatory steps well in advance of this date. Least important of these is the question of when to take sterling back into the exchange rate mechanism. The Treaty says that currencies must be in the "normal" bands of the ERM for at least two years prior to the spring of 1998 - ie from six months ago! This seemed definitive when the treaty was drafted (at which time the normal ERM bands were 2.25 per cent either side of the central rate). But the break-up of the old ERM in 1992/93, followed by the introduction of 15 per cent bands for all member currencies, has muddied the waters considerably. The term "normal bands" no longer seems to have much meaning. Some member states may still seek to enforce the two-year rule, but it is unlikely to be a decisive stumbling block to a late UK application.

Much more problematic is the date of statutory independence for the Bank of England, an inescapable requirement under the treaty. The UK Treasury (which is trying to help the Chancellor by scouring the treaty for every nuance which might permit a delayed decision) seems to be of the opinion that the UK could simply promise in the spring of 1998 to make the Bank independent sometime before 1 January 1999.

But Maastricht says quite explicitly (in Article 108) that the relevant legislation must be in the statute book by the time the European Central Bank is established in July 1988. And this means that the legislation would have to be announced by the autumn of 1997 at the latest. This in turn effectively implies that the EMU decision must be taken by then, or else the UK will be deciding by default to opt out of the first round.

Then there is the political question of when and how to hold the referendum which both UK parties have now virtually promised. The vote itself could probably be delayed beyond the spring of 1998. (The Germans could hardly object to this, since their own Parliament is due to ratify the final membership list after the crucial deliberations have taken place at EU level.) But a referendum will require the passage of yet another piece of highly contentious legislation in the House of Commons.

This, and the Bank of England Bill, would wipe out the lion's share of Parliamentary time in the 1997/98 session. Announcements to that effect would have to be made in the Queen's Speech in autumn 1997. This would also be the very last moment at which it would be reasonable to tell the private sector to start the costly preparation for EMU.

No government in its right mind would choose to do all this just in case it wants to join. It would only embark on such a highly charged process if it had already decided to exercise the opt-in. So the bottom line is that the decision will have to be taken when the 1997 Queen's Speech is being planned, which means by the latter part of next summer.

The Rubicon will therefore be crossed within a very few months of the General Election, and this will become clear to the electorate before then. Already, the core EMU countries are in a frenzy of preparation for the 1999 start date, and even the governments of countries like Spain and Italy are spending most of their waking hours on the subject. Correspondingly, their chances of joining in the first round are improving all the time.

In the UK, there is no frenzy of preparation, just a desire to delay. Unless this prevarication ends immediately after polling day, our lack of preparation will in effect mean that we will have decided to opt out of the first round.

This is a decision, and a debate, that cannot be delayed much longer, whatever the Chancellor may say.