THE Liberal Democrats firmly nailed their colours to the European mast

yesterday by reaffirming their commitment to a European single currency

and calling for more dialogue with the public over its benefits.

Last year's party conference was overshadowed by Britain's withdrawal

from the exchange rate mechanism of the European Monetary System, and

Ministers have repeatedly made clear that there will not be an

early return.

However, the Liberal Democrats' Treasury spokesman, Mr Alan Beith,

told the conference that Europe needed the advantages a single currency

could bring and that it still could be achieved this century.

Mr Beith warned that economic recovery could be ''snuffed out'' by

panic spending cuts, and he argued instead the case for ''limited and

targeted additional borrowing''.

His message to Chancellor Kenneth Clarke ahead of the November Budget

was that this money could be channeled into construction, public

transport and energy efficiency.

Mr Beith later confirmed that he was calling on the Government to

increase the Public Sector Borrowing Requirement, but had not yet fixed

a figure.

''I shall be arguing between now and the Budget for extra spending for

investment of somewhere between #1 billion and #4 billion,'' he said.

The Government's projected PSBR figure for 1993-94 is #50 billion

In an intensely pro-

European speech, he claimed that the single currency held out the

opportunity for low interest rates, investment and jobs.

When the pound did return to the ERM, that return should ''mark the

begining of a quite short transition period to the adoption of Europe's

single currency,'' Mr Beith said.

Recent events had made the ERM ''a very draughty waiting room in which

it might not be wise to spend too long once the greater security of a

single currency is available.''

The conference endorsed an economic policy which includes calls for:

* A concerted attack on unemployment through well-

targeted public investment.

* A politically accountable, but independent, central bank.

* A ban on the imposition of VAT on domestic fuel.

* Long-term planning, backed by adequate funds, to ensure a balanced

supply of engineers, scientists and technicians in Britain.

Mr Beith said the Government's economic policies were in total

confusion and that the Prime Minister cut a sorry figure as the deep

divisions in the Tory Party were exposed.

However, he left open the question of whether the Liberal Democrats

would, if necessary, raise taxes in certain areas, stating: ''The extent

to which income tax increases should be part of the Budget package is a

judgment which is best made nearer to the time of the Budget, but we

believe that people accept the case for fair taxation when it is clearly

committed to such essentials as better education.''