Should we campaign to rejoin the Euro? In my blog article, Say no to extrawürst, I look at Niall Ò Conghaile’s arguments on EU re-entry terms and dovetail them with my realisation that the UK’s previous unique deal and its opt-outs are gone. I have felt there is room for a deal on the Euro and there are problems with joining the Euro as even some member states realise. Here are my notes and links …
In that article, I say,
The Euro is clearly an essential part of the single market, but the stability and growth pact remove the targets of fiscal policy from democratic control and underwrites austerity. I note that both France and Germany broke the stability and growth pact limits during the pandemic and over half the countries in the EU were in breach in 2014. I wonder if it would be possible to negotiate an agreement such as the Swedes have where the UK agrees to join the Euro but doesn’t set a date; it would be important that any such deal is not seen as just more extrawürst and a continuation of Britain’s exceptionalism. I should also add that with both Labour and the Tories arguing that debt reduction through fiscal consolidation is a key economic goal, I have to ask why I am bothering.
Elsewhere in several articles, on the blog, I criticise the SGP, including here, here, and here. My main criticism is that it binds its members to austerity and monetarism by treaty, with no ability to democratically amend the goals of these policies. One problem is that the German’s still have a collective memory of the Weimar Hyperinflation, which they ascribe to loose money and are determined not to repeat it. They have a political consensus in favour of strong debt restraint, except when their banks are the debt holders.
Here, is a page detailing all four economic convergence rules, and wikipedia’s comment on the original quaification rules, these are debt and deficit levels, and inflation and interest rates, we can compare them with New Labour and Brown’s original five tests. which focused on business cycle alignment, flexibility, foreign investment, financial services industry (ptui), and, growth and jobs. NB The EU’s rules are a potential problem for a government committed to investment led growth and full employment.
I talk about economic indigestion in this article, where I say,
[my] … Dutch correspondent started by talking about the euro. Some of what he said particularly on the Euro was a bit worrying, but it’s a price worth paying if that’s what it takes. I suggested that the Swedish precedent on the currency is important and that there may be dangers to the EU in attempting to subsume another global reserve currency too quickly. I also wonder if those nations hosting cities that have replaced London’s international financial trading capability, really want to see the London market makers able to trade in euro instruments so soon. To me more importantly on the currency and macro-economic convergence, are the limitations entrenched in the ‘stability and growth pact’. Debt levels and deficits should be the result of a democratic mandate and not embedded in an unchangeable treaty; the need to breach the stability and growth pact limits during the pandemic is a proof point to this truth.
On the question of such indigestion, since it was founded by merging the French & German currencies, and the so-called sterling area is far less impressive in size than it once was, this will be less of a problem than I think. Some argue the Euro would be more stable without the German economy.
The noughties Treasury position is summarised in an Appendix, to a report from the Select Committee on Treasury Sixth Special Report, entitled Memorandum from HM Treasury. This was a reply to the Select Committee Report. I am quite shocked that the HoC documents are undated. I am unsure how relevant these documents are today, nearly 20 years later. It emphasises the decrepitude of today’s monetarism as the treasury reply aka the appendix spends a lot of time considering the ECB’s tools and mandate for monitoring and controlling the amount of money; today it’s just become demand suppression.
Later in my researches, I found this article, entitled “Twenty years ago, Britain could have backed joining the euro—and stopped Brexit” by Paul Wallace, he argues “a decision to join the euro—despite its woes in the early 2010s—no longer looks manifestly worse than the path actually taken.” Wallace is the author of a book, “The Euro Experiment”, in which his abstract claims, “… the recent crisis can be best understood in terms of six fundamental issues: sovereign debt, banking, private debt, macroeconomic imbalances, defective economic governance, and the interplay of national and European politics.” The question for those who still think we should be out, remains, has the UK done better.