The "one-size-fits-all" monetary policy of the eurozone countries is preventing Britain from joining the single currency, the governor of the Bank of England, Sir Edward George, told a seminar in Spain yesterday.

He called on the European Union to allow greater flexibility in the labour, goods and capital markets.

His comments came as a report claimed that chancellor Gordon Brown had imposed a sixth economic test, that sterling would have to be devalued by 30 per cent for entry into the euro.

Such a change would rule out British entry for the forseeable future, although Treasury officials claimed there had been no change in government policy on the single currency.

The five economic tests are to be assessed in June 2003.

The Independent today reports that since the exchange rate is perceived as the biggest bar to Britain's euro entry.