The euro notes and coins arrive on the Continent within months, so should the UK be thinking about joining soon?

Now that the general election is over, the Government's attitude towards the European single currency has become clear - as clear as mud.

The ambiguity of our relations with Europe is illustrated by the very fact that we and the Government talk about Europe as if it were another place, as opposed to the rest of a continent of which we form an important part.

National notes and coins will disappear from circulation on 1 January 2002; then the 12 member countries of the Eurozone will indeed have a single currency. The absence of exchange rate transactions within the Eurozone will make life simpler in many ways. But a monetary union does mean that higher inflation or production costs in one country can no longer be offset by periodic devaluations of the national currency.

There are many reasons why the British Government's policy towards the euro is in such a confused state. Perhaps the most important matter, from the economic point of view, is the exchange rate. If there is one persistent feature of the performance of the British economy since the 1950s, vis à vis Germany (the major Continental economy), it is that our productivity has been relatively poorer and our inflation relatively higher. The only way we have managed to keep in step with Germany over the years is by adjustments of the pound against the D-mark.

One can't help noticing that for some time now the pound has been in the range of DM 3.00 to nearly DM 3.40. But in the five years since 1995 the volume of our exports rose by just over 30 per cent, whereas imports shot up by some 45 per cent. We have experienced a huge and unsustainable trade deficit, and once again history suggests it will end in tears, with the exchange rate having to fall.

There is another, quite separate consideration: even if the pound were at the right level for current trade, can we be sure that problems would not arise in future?

Which brings us to other reasons as to why the Government's European policy is in such a state. One is that Tony Blair is nervous of the anti-euro feeling shown by the opinion polls, and especially of the Conservative press.

Then there is the position of his Chancellor Gordon Brown. He sees it as his mission to improve the productivity of the British economy and conquer inflation in a way which might make it possible for us to survive in the single currency area. But he is in no hurry to enter the single currency.