The Issue of the EURO

This is really the very real issue in the whole European debate and every debate I've been in on it has got very passionate, in brief this is a debate that can be won, and for all those who enjoy debating it will be quite enjoyable in the process.

I DO NOT advocate joining now, but when the conditions are right, in about 2 to 3 years.

Arguments for Joining: Dealing in only one currency will reduce the cost of converting one currency to another. The reduced costs will benefit business, consumers and travellers. With a single Europe wide currency direct comparisons can be made between wages, prices, ecetera... This will increase competition across Europe, lowering prices for the consumer (for two reasons : business suppliers will have to cut prices which can be passed on to the consumer and business themselves will have to cut prices). In terms of GDP Europe under a single currency is far stronger than the U.S.A. and Japan. Soon the Euro will become the second most important currency reserve, second only to the U.S.A. Scrapping exchange rates between the nation states of Europe eliminates risks of unpredictable exchange revaluations and devaluations. There will be greater efficiency in the allocation of capital in Europe as the Euro brings together the national financial markets. It will no longer be possible for a nation state to devalue its currency in order to increase the competitiveness of its exports. BMW sited the U.K.'s Euro scepticism as one of the main reasons it decided to sell Rover. Microsoft went to Ireland, not the U.K. due to the U.K.'s refusal to join the Euro. Dito for Intel. This Euro scepticism is directly putting U.K. jobs and potential U.K. jobs at risk ! The reason New Labour and the Liberal Democrats support the Euro is not because they want to be unpopular nor that they are insane, but beacause they have looked to the future and realised that joining is in Britain's best interests. The degree of trade we do with Europe is greater than the 50%-55% figure that was true at the start of the 1990s and has been used by both sides. For the UK as a whole it is now 60.8%(1999) and in fact is higher in particular regions. Here are some facts : Region % exports to E.U. North East 79.5 North West 68.5 Yorkshire and the Humber 64.8 East Midlands 59.3 West Midlands 53.4 London 44.9 South East 60.1 South West 68.7 England 58.4 Wales 72.1 Scotland 72.5 Northern ireland 66.0 UNITED KINGDOM 60.8 It is intersting to note how the regions which have the greatest exports have a good manufacturing base, which is being hurt most by the strong pound, causing the loss of more than 83 000 jobs since the Euro came into circulation. The whole will be greater than the sums of the part.

Rebutts to Euro Sceptic Arguments: On the issue of loosing 'British' identity and symbols : What is 'British' identity ? What do symbols such as the pound count for in the international arena ? Whenever I meet an American I do not say "Good Sir, I respect you for you use the mighty dollar" and as the yen crumbled I did not say to a person from Japan "I have lost respect for your once great currency and hence you". NO ! I am at a loss to understand where this great obsession with the pound came from in the same manner that I cannot understand homophobia or indeed xenophobia. Symbols of a country really count for nothing in the 21st century. Britain will still be a nation state after the introduction of the Euro and will still have its own identity. On my question of what is British identity I would say form my experience of living in Europe then I would say essentially the food, the regional music and cultures and the accent as we speak the language of the state we are in. None of these are threatened by the introduction of the Euro. On the issue of the Euro being the first step down the line towards the United States of Europe(USE) : If the USE is created in the next 100 years I would be deeply shocked : in other E.U. member states there are equal reservations about it as there are in the U.K. The Single Currency has always been popular on the continent since the 1970s when it was first seriously debated, but to my knowledge the maximum support for the USE on the continent is about 40%-50%. I will not say that it will never happen, but if it does it will be because it will be good for the whole of the E.U., and I am sure there be an 'opt out' option. On the issue of the cost of introduction as businesses and banks change forms and software to accommodate the Euro. Further, governments will have spend money on educating the public : That is a frankly lame and deafeatist point since all progress has involved an outlay and unless we spend some money now we will never enjoy the benefits of the Euro. On the issue that Europe may not be an Optimum Currency Area (OCA) and that Britain is not in line with other economies of Europe, either now, or in the long term : Lets look at some facts : the cooeficient for the quartelry change in GDP for 1980-2000 (c), fig1, and Data on the Fulfilment of the Masstircht Criteria, fig2. fig1 Country c France 0.34 Italy 0.29 Germany 0.38 Great Britain 0.39 Spain 0.40 Netherlands 0.37 Source : European Commission According to economists at the Cente d'Etudes Prospectives et d'Information Internationales, studying the information above and other, all those and other European countries are in line and form an OCA. Furthermore these are not the only economists who support the Euro based on the above data and other data. fig2 Country Inflation Deficit(%GDP) Long Term Interest Rates UK 1.8 1.9 7.0 Portugal 1.8 2.5 6.2 Geramny 1.4 2.7 5.6 France 1.2 1.5 5.5 Italy 1.8 2.7 6.7 Netherlands 1.8 1.4 5.5 E.U. Average 1.6 2.4 6.1 Source : European Commission From fig2 it is clear that the U.K.'s economy is well aligned with the other economies of the E.U. and the average and the non truths paraded about by euro sceptics on this issue are clearly wrong (e.g.'Killer Fact : the economies are not in line'). Such fundamental flaws in their information raises questions over other so called 'information'. Despite that I am not advocating that the U.K. joins now, it is essential that there can be no questions over economic alignment when we join. We must join as soon as the conditions are right, only then and not before. The majority of the people who know, the economists, support the Euro. On the issue of common interest rates, which might not benefit every region of Euroland : Is it not the case that within any landmass there will be a need for a somewhat different interest rate between different areas ? So if this line is taken to its logical end then the U.K. should be split North/South since they ultimately could do with different interest rates. Then split again to make sure the rate is optimum. Then further. And further again. That is lunacy. On the issue of the independence of the European Central Bank (ECB) : The ECB is a direct contuinuation of the indepeandant Bundesbank form the European Monetary System (ESB) which is regarded as independant by all (in fact it has been the anchor of the EMS). The only reason it might have to prove its independence by being hurtfully tough on inflation will be because of petty alegations otherwise. On the issue of excessive fiscal discipline deepening a recession still further : It is in the common Euroland interest not to damage to the economy so I cannot envisage a time when the ECB or other E.U. body intentionally hurts its own economy. Finally, on the issue that the people of the U.K. 'do not want the Euro' : There was a time when the people of the U.K. thought the world was flat, but did that make it correct ?