LONDON: Economists are much more pessimistic about British entry to the euro following the diplomatic spat with France over war in Iraq.

They say the poisoned relationship between Tony Blair and Jacques Chirac will make the delicate diplomacy required to negotiate British entry even more difficult.

HSBC’s economics team, previously one of the most bullish on British entry, believes that “the door for British entry is practically shut now”.

UK economist John Butler said that with a slowing economy and a house price bubble that may soon burst, a sterling devaluation remains an indispensable weapon of economic policy.

“The risks to the UK economy have risen enough for politicians to want to leave the sterling escape route wide open,” said Butler.

Any attempt to join the euro would require careful negotiation on the joining rate, with Germany and France likely to ensure that Britain does not enter too low. But British pro-euro campaigners have also pointed out that selling the euro to a sceptical British public will require a number of negotiating victories. Britain could push for the top job at the European Central Bank, ask for the ECB to adopt a monetary policy model that mirrors the Bank of England’s, or even change the appearance of the euro note itself to boost popularity.

France had been making signals that it wished to be helpful in some of these matters. Last year economic advisers to French prime minister Jean-Pierre Raffarin suggested the ECB adopt Bank of England-style monetary policy.

“Divisions over Iraq will be hard to repair. The relationship with Europe may never be the same again,” said Mark Cliffe, chief economist at ING.—Dawn/The Guardian News Service.