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Mr. Clarke: I can confirm that there will be a two-day debate. I assume, subject to agreement through the usual channels, that one day will be devoted to economic and monetary union and the other to the intergovernmental conference.

I always report back on ECOFIN meetings, not usually in this form, but by written answer. I am always ready to come here if anyone wishes to hear about ECOFIN meetings. Sometimes, rather bizarre accounts of those meetings appear. I answer parliamentary questions on the subject. I put explanatory memoranda before the Scrutiny Committee. I appear before the Select Committees of both Houses. I do not think that there is any detail of the process that I have not shared with anyone on either side of the House who is seriously interested in listening.

Occasionally, the right hon. Gentleman puts to me points that he appears to have picked up from my speeches. I have lost count of the number of times that I have pointed out that economic and monetary union is of enormous importance to Britain, whether or not we join. It is not a new discovery by the right hon. Gentleman. He knows perfectly well that, as at present we are prospering because we are in the single market and the single market is extremely important to us, it matters to us a great deal how the euro zone works, whether we join it or not. That is why I keep attending the meetings.

It is true that there are only two outstanding issues in the draft report to go forward, but I have made the whole report subject to a parliamentary reserve, as I described. I have already set out the issues in my statement. All the details of any other aspect on which the right hon. Gentleman wishes to press me in these exchanges or elsewhere are in the explanatory memoranda. The ERM 2 mechanism is described. It will be a hub-and-spoke mechanism, as opposed to ERM 1, which works on a different basis. At every stage, it has been clear that membership of ERM 2 is voluntary, and the Prime Minister and I have always made it clear that we cannot foresee circumstances in which Britain will join ERM 2.

It is right that the document states that members with a derogation can be expected to join, but this country is not, strictly speaking, a member with a derogation--we have an opt-out under our separate protocol 11, to which I referred.

Nothing will be decided at the Franco-German summit, any more than anything was finally decided at the Anglo-French summit that I attended, or at the Anglo-German summits that I attend. In fact, any idea that yesterday's meeting involved some sort of Franco-German axis against the rest of the members is a complete illusion. I am glad to say that the 15 Ministers from 15 member countries were all defending their national interests and no such cross-alliances emerged.

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It is certainly true that exchange rates will be a matter of common concern. That was established in the treaty--it has been the position for 25 years, since we signed the treaty of Rome. The right hon. Gentleman's sudden and horrid realisation of that aspect of the argument is, I think, a little belated.

As for the submission of convergence programmes, we have been submitting such programmes for at least three years. We have been declared to be in excessive deficit and we have been made subject to non-binding recommendations, along with, I think, 12 other member states, which are all currently in excessive deficits. Those recommendations are not binding--I could walk away saying, "I do not agree with those recommendations, thank you very much." In fact, the recommendations are entirely in line with this Government's policy of getting rid of an excessive deficit and putting the public finances into a healthy state.

That is the position. This is the second statement that I have made in a week and I look forward to debating the subject with the right hon. Gentleman. The reason why these matters are not debated on the Floor more often is that the Opposition have never asked for a Supply day debate on the issue. It is the right hon. Gentleman who runs away from discussing the issue, because it is he who has not had any moments of clarity with his Back Benchers. I look forward to seeing the right hon. Gentleman on the spot, explaining precisely where he agrees with me, where he disagrees with me and what he is going to say about it to some of his own Back Benchers.

Mr. Norman Lamont (Kingston upon Thames): Is the Chancellor aware that there is total support for the view that the convergence criteria should not be fudged? However, does not that also apply to this country? Will my right hon. and learned Friend confirm that it is a provision in the Maastricht treaty that, in order to qualify for EMU, a country has to join the exchange rate mechanism? Is not that the reason why Italy has rejoined the exchange rate mechanism in the past few days?

If my right hon. and learned Friend thinks that exchange rate stability should be judged post hoc, because the ERM does not really exist, will he confirm that he has taken the Law Officers' opinion on that point? Will he tell us from what central exchange rate the criteria for stability will be judged over the next two years?

Mr. Clarke: At the moment, we have a floating exchange rate, not a central exchange rate. The treaty was drafted at a time when the ERM narrow bands were the normal margins for currency fluctuations. No one has reinterpreted the treaty since those members still in the ERM have been moving within broad bands, and there are differences of opinion about that aspect of the treaty.

If one examines the treaty, one finds that it will eventually be for the Heads of Government in the Council to decide whether the member states comply with the conditions necessary for going ahead with stage 3, which go beyond the convergence criteria and enable them to address wider issues. I certainly agree with my right hon. Friend that it is extremely important that, if and when they move to that decision, they decide to go ahead with membership only in a euro zone of countries that are genuinely convergent, in which the criteria are not fudged in any important respect. Otherwise, I would think that

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that was, in itself, a reason for insisting that the United Kingdom ought not to join--regardless of other problems that might arise at the time.

It is a question not only of hitting those magic convergence criteria figures for the calendar year 1997, but of countries putting themselves into a position where they will maintain stable fiscal conditions in their economies for the foreseeable future. That matter has still to be judged and it is currently extremely difficult to forecast what our position will be.

Mr. Malcolm Bruce (Gordon): Will the House take note of the fact that the Opposition's explanation of their obscure position on economic and monetary union took nearly as long as the Chancellor's explanation of the Government's obscure position on economic and monetary union?

Will the Chancellor acknowledge that, as long as the United Kingdom remains a potential or aspirant member of economic and monetary union--which is the Government's position--we shall be bound by convergence criteria that will inevitably be determined by the details of any stability pacts agreed by members of the euro zone? Given his robust defence of the Government's position, which those on these Benches respect and admire, will the right hon. and learned Gentleman also tell the House that he would not stay in a Government who undermined his position by declaring that they would not under any circumstances join economic and monetary union--something which, in any case, is not in the Government's gift to offer?

Mr. Clarke: Unlike the Labour party, the Government not only have a clear position, but restate it rather frequently. We cannot be criticised for the number of occasions on which various members of the Government keep setting out in unequivocal terms what our policy is. We are also pursuing that policy in some detail. I hope that the House's sudden interest in frequent statements on progress will take forward a little the understanding of where we are.

It is certainly true that, within the single market, convergence has always been important. As I said, the Government signed up to all that in the late 1980s--in 1986, I believe--with the Single European Act. If there were unstable conditions throughout the single market, and countries were getting into fiscal problems of one kind or another, or there were wild fluctuations in exchange rates caused by unsuitable fiscal policies, the pattern of trade would be disrupted and every member state would suffer.

We have been submitting convergence programmes. We submit them to the House and they are approved by the House. Then we go through the surveillance procedure and make recommendations that match what we wish to do. We take part in the surveillance procedure of other member states, and urge them to take similar action to get their fiscal policies in order, so that stability in the market can be maintained for all of us.

Mr. John Redwood (Wokingham): Having agreed to a regulation that will make the euro legal within the European Community, how does the Chancellor propose to make it legal outside the Community? Does he agree that one of the recitals in the proposed regulation serves

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to undermine the legality of the currency outside Europe, in that it invites people to realise that it has not been made properly legal outside the member states? Does he believe the legal advice in the Community that there would need to be legislation in countries such as America and Japan, to make it legal compulsorily to convert their deutschmarks and ecu into euros?

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