A bit of a leading question! (The Euro)

Member Name: oxjdc

Product:	The Euro
Date:	12/08/00 (34 review reads)
Rating:

Advantages: Capital mobility, Price Transparency, Exchange Cost elimination.

Disadvantages: Changeover cost, loss of democratic control of policy-making, inability to set appropriate economic policy for the UK, potential for tax harmonisation, unaccountable central bank, slippery slope to a federal Europe, no way out if it goes wrong.

To contrast the choices as being between "keeping the strong pound despite its effects on manufacturing industry", and "joining the Euro" is not really correct.

Joining the Euro doesn't in itself do anything about the level of the pound, except for fixing it forever! So we keep the bad effects of the strong pound - we just call it the Euro, and become an uncompetitive region.

Fixed exchange rates are bad for the economy if the areas they are fixed between are not compatible - we saw this with the ERM - 100,000 businesses bankrupt, a million out of work, and tens of millions of homes worth less than the mortgages they had been bought with.

In fact manufacturing is expanding, UK unemployment and inflation are far lower than countries in the Euro, and we are attracting record levels of investment.

Now, if this goes wrong, our options are still open - if we feel that the people in charge of making economic decisions make the wrong ones, we can vote out their political masters. The economic criteria of the EuroBank are written into the treaties, however - so 15 countries would need to agree, all at once, to get those changed - hardly democratic!

Add into this the deflationary nature of the Maastricht criteria - the absence of a symmetrical target for inflation, and the bias against the welfare state written into the demands of "convergence" - and the Euro means misery for a country like Britain, albeit after a brief boom caused by the inappropriately low interest rates for a country with a far higher level of mortgage-funded home-ownership than most of the rest of the EU.

We're doing fine as we are - if it 'aint broke, don't fix it!

jdcxxx

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