The Tory Party under Winston Churchill missed a golden opportunity to make the pound Europe's dominant currency, Warwick University researchers have found.
A 1950s plan to create a sterling area - a European currency bloc pegged to the value of the pound - was considered by Churchill as a means of addressing Britain's balance of payments problems.
But his Cabinet postponed investigating the idea and dropped it when economic conditions showed signs of improving.
Had they gone ahead with it, the Euro may never have been born and today's Tory party might not be facing a dilemma over monetary union.
According to Peter Burnham, who is leading research into the international implications of the scheme, it would have given the pound a role equivalent to that played by the Deutschmark in the European exchange-rate mechanism.
But it would also have divided Europe into three currency blocs: a United States-led area, with a convertible currency (the dollar) at a fixed rate; an area with floating convertible currencies based around sterling; and the rest with fixed unconvertible currencies.
Churchill was influenced by leading figures at the Bank of England and the Treasury who thought that a new "payments club" could be formed with a floating exchange rate pegged to sterling, with France, Belgium, Holland, Portugal, Scandinavian countries and most of Britain's former colonies as its members. Germany, Austria, Greece, Italy, Spain, Switzerland and Turkey were expected to stick with the US.
Dr Burnham, a politics and international studies lecturer, said: "It would probably have ended the International Monetary Fund and the World Bank, whose main role then was to monitor the fixed exchange rate. But the real question is what sort of relation would the sterling bloc have had with the dollar bloc. It is likely that the dollar bloc would have been seen as the harder currency."