DCSIMG

Why the UK needs to overcome its euro-phobia...

I AM curious as to why there is relative silence about the catastrophic fall in the value of the pound? Is it because any discussion as to why would inevitably lead to the conclusion that the problem could have been avoided by membership of the euro?

Apart from those who are ideologically opposed because to adopt the euro would be insulting to the legacy of Queen Victoria or because their currency speculator friends would lose out, I know of few people today who still maintain it was right not to join at a sensible rate of, say, 1.30 to the pound. Some cite a fear of price rises on conversion as a drawback but this could be dealt with by separating the introduction of new notes and coins from the principle of joining.

To adopt the euro would mean that about 90 per cent of Britain's economic activity would be in the one currency. While it is true that a low value pound assists exports, it makes imports much more expensive.

Some maintain that the discipline of a fixed interest rate could never be right for Britain but see no problem in the harm caused by massive changes in the value of the pound. The fact that a centrally fixed interest rate might be 0.5 per cent adrift from an 'ideal' rate should not assume greater importance than the benefits arising from removing currency fluctuations such as greater economic stability and increased trade.

Furthermore even within the sterling economy different regions need varying 'ideal' interest rates but have to live with that imposed by the Bank of England, traditionally for the benefit of London and the south-east. Governments have a range of fiscal policies at their disposal, such as increasing VAT or compulsory increases in pension contributions, when there is too much demand and risk of inflation.

I wonder how the lady I met in Otley market who sells flowers imported from Holland is coping. Also at school we have just had to ask the language school that we send students to in Spain to reduce their price in euros because the pound is so low that it would cause our parents hardship.

The euro isn't perfect, of course. I would want to see changes to the growth and stability pact as a condition of merging the pound with the euro and there should be debate on the benefits of retaining our own notes and coins. However one reason given for not joining was that the UK economy, with its emphasis on financial services, was more flexible than the old-fashioned economies of the eurozone. We see now where over-reliance on financial services and denigration of manufacturing has got us.

When the immediate sterling crisis is resolved I hope that Mr Brown will reconsider his five tests for entry which consigned membership to the long grass and commission a rigourous analysis of how we can join the world's most successful currency, hopefully by the Olympics in 2012.

James Bovington, Church Grove, Horsforth, Leeds

 
 
 

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