Euro – the return?
Just when you thought it was safe to go to the newsagent without fear of an article on the euro – it’s back.
Mandelson’s arrival, Ken Clarke’s return and now Nick Clegg’s recent interview, have all conspired to get the issue of the UK and the euro back on the agenda.
Well, it’s all rubbish. And I say this as a comparative pro-European.
The proponents of the pro-euro case say that the euro would be a sea of tranquility in the current financial crisis. They say that Britain cannot survive global instability without being anchored to the euro. They point to the current fall in sterling as evidence for this.
Total nonsense.
If the euro was such a zone of stability why are the Irish, Spanish, Germans and a whole host of other eurozone countries facing a recession as bad or even worse than the UK? If the UK had had the euro for the last few years, our interest rates would have been even lower in the property boom period making the bust even worse now. (Ask the Spanish and the Irish about that one – their property crashes are possibly even worse than ours.)
If the UK had had the euro, we would now have much higher interest rates just when we must have the lowest possible rates to help us out of recession. Is Nick Clegg recommending that right now… err, I think not.
And if we had the euro right now, we would not have a currency that is dropping. What the pro-euro enthusiasts miss is that having a currency that can fall can be extremely beneficial. Sterling falling will increase the price of our imports and make our foreign holidays more expensive. But it makes home grown products more competitive, which is good. It makes our exports more competitive which over the longer term will help to rebalance the UK economy, which is good (long term benefit as short term nobody is buying more of anything anywhere). And it will act as a major boost to UK tourism as foreigners flock in to the new value for money Britain – great news.
So why on earth should we join the euro? We have a far greater chance of recovering from the recession with our own interest rates and our own currency.
As a postscript, Gordon Brown published thousands of pages of economic analysis at the time of his (correct) decision to stay out of the euro several years ago. In that analysis, there was a paper suggesting that the euro would increase trend rates of growth of member countries.
The euro does have benefits for some of its members, but this particular view on growth was rubbish as history has now shown. The UK has grown faster than many eurozone countries and the eurozone has seen no increase in its trend rate of growth since the euro was created.