Euro may be Frankenstein monster, warns Tebbit

Inside Parliament: Fokker 'shows the perils' of union Battle between the 'ins' and 'outs' Warning over avalanche of directives

Lord Tebbit yesterday dubbed the embryonic European currency, the Euro, a "Frankenstein" and held out the collapse of Dutch aircraft makers Fokker as a vision of the industrial future under a single currency.

Though the former Tory party chairman was relaxed about the idea of a core of European Union members going ahead with the Euro, he told a Lords committee it was "extremely important" that Britain remain outside.

The disintegration of Fokker, with the expected loss of 8,000 jobs in the Netherlands, was a "classic example" of the perils of a single currency. The international civil aircraft market was tied to the US dollar but the Dutch guilder was kept high because it was tied to the German mark, Lord Tebbit said.

Peers on the European Communities Committee are conducting an inquiry into the consequences of a minority of EU countries going it alone on monetary union - shadowing the ministerial study claimed by John Major as his success at December's Madrid summit.

Lord Tebbit's thesis was echoed - or informed - by Professor Patrick Minford, the right-wing economist, who had no qualms about Britain being "part of the awkward squad" over monetary union.

Both were dismissive of suggestions that, as Lord Tebbit put it,"the caddish British, irresponsible Italians or the devious Greeks" would devalue their currencies to gain an edge over a single currency group committed to the German path of rectitude.

They also emphasised that any discrimination by the "ins" to counter the competitive advantage of the "outs" would be in breach of the Treaty of Rome.

Professor Minford acknowledged the fear of industrialists, relayed by Lord Haslam, chairman of Bechtel and former head of British Steel, that the "ins" would retaliate if their businesses were suffering.

The "resentment factor" was a very valid concern, Professor Minford said, pointing out that inward investment was based on the fact that Britain was already 40 per cent cheaper than Germany in labour costs.

If access to the single market continued unchecked and Britain stayed outside the social chapter, then the country would remain the place for the Japanese to invest. "Europe will have to change," Professor Minford said. It could not continue in a "cul-de-sac" of social protection that enabled Britain to capture such a huge percentage of investment.

Lord Tebbit disagreed with Baroness O'Cathain, a Conservative, that the "ins" would have more power and influence over EU economic policy.

"Not necessarily," he replied. "Before long they would face the reality that you can't have two finance ministers for one currency and they would move inexorably to political union. Whether that would be a 'love-in' or a political disaster we may all have to guess."

Later, Baroness Chalker, Minister of State at the Foreign Office, told peers the Government had "ruled nothing in and nothing out" over joining a single currency by the optimistic date of 1 January 1999.

Her words will not be music to the ears of Tory Euro-sceptics who yesterday again called on the Prime Minister to declare his opposition to the Euro.

As the group launched a document warning of an avalanche of directives from Brussels, Teresa Gorman, MP for Billericay, said John Major had "a golden opportunity to take another initiative in order to distinguish us from Labour who are going to cave in to Europe hook, line and sinker".