h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

This is primarily about Britain and other EU countries, but anyone is welcome to join in.

The Euro - should Britain join?

My opinion first - no we should not join.

Why?

First off, we lose control over our currency and therefore part of our economy. As the collapse of WorldCom has shown, economic collapse in any large Euro-using state would have repercussions on other countries using the Euro.

Second, although in favour of the EU as a community of nations, I am against a single European state. I think the Euro is a step towards this.

Third, Euro notes are horrible things. Pounds look good. (yes, I think this is important :P)

Fourth, nobody wants the Euro except Big Business and a handful of EU politicians. As far as I know, not one of the states that has joined the euro did so through a referendum.

Any other opinions, please make know.

Zagreb

As the collapse of Worldcom *will* show, when the dollar sneezes, the pound pretty much catches influenza. It wiill be interesting to see how the Euro fares against this fact in the next couple of months.

I couldn't care less what it's called or what it looks like. If they take it down the pub, it's ok with me.

I also like the idea of holidaying in Majorca and not having to bother with three more currency transactions before I can go to Holland and/or Germany, which is a pretty good description of my travel plans this year.

I also hope it might bring some sort of parity to those items whcih are horribly overpriced in Britain. Going to be very difficult for the car manufacturers to justify why a car costs 10,000 Euro's in Germany and 15,500 Euros in the UK.

I've still seen no solid ECONOMIC reason why the Euro is a bad thing, either.

I think I'm probably in favour on balance, but I'd like to see some evidence of how well the Euro-zone is doing economically since the introduction of the Euro.

I don't have any sentimental attachment to the pound - I just want the things the pound buys. In these days of globalisation no government or nation state is truly independent. In the face of huge external pressures it makes sense to me to be part of a group who can provide mutual support and clout - there's strength in numbers. I'd rather we were inside the tent p*****g out than outside it p*****g in.

I am against joining the euro, mainly because joining would mean that we would lose control of our interest rates. Interest rates are one of the major ways of keeping the growth of the economy within reasonable levels, avoiding excessive growth (a boom), or recession (a bust), but keeping growth sustainable. This also is a factor in keeping inflation under control, as excessive growth can be a factor in inflation, driven by the demand growing too fast for supply to catch up, forcing up prices.

Interest rates can be increased to slow down growth, by providing incentives to save, rather than spend, among other things, and lowered to increase growth when growth is low.

If we were part of the euro, then interest rates would be set by politicians from the countries of europe, to meet the needs of everyone collectively. Given this, it will almost certainly not be that which we would decide for ourselves. In the extreme cases, it could lead to excessive economic growth as the interest rate policy is determined by those who are in recession, when we want to avoid a boom, or recession, if other countries want to slow down excessive growth, whilst we have slow growth.

In any circumstance, one single interest rate cannot suit everyone, unless all countries are in step with each other, which is unlikely for the long term, as it is pretty much unnevitable that some things will hit certain contries harder than others, forcing them out of step.

Also, there is a danger that interest rates will not be to suit the economy, but may be partly linked to politics. Just as few people at election time want to increase taxes, few would want to increase interest rates, even if it is a neccesary step. This is one thing that the UK's current system, where interest rates are put in the hands of the bank of england, avoids.

I'm with you Blues Shark.
The Euro makes my life a lot easier: living in Germany I do a lot of my shopping in either Holland or Belgium, and it's way way easier now. Plus I usually holiday on continental Europe, so that's all peachy too.

The benefits for business... I think the Jury's still out on that. We use dollars as do most of our customers.

The only thing that worries me is this inflation thing. The prices here, and I don't care what the Bundes statistisches amt says, have gone up. A lot. Some places just replaced the DM sign with an € sign! Mostly, though, prices were rounded up.

Blues Shark,

I think we can find out if we are paying higher prices for goods than on Continental Europe by working out the maths.

I agree that holidaying in Eurozone countries would be easier, but is that really worth giving up control over aspects of the economy for?

I know nowt on this issue, enlighten me. All I can gather from what I've read/heard is that neither side talks much sense.
However I cannot see how it would take away our 'Britishness', which seems to be the most vocal reason given by the againsters.

I quite enjoyed using the euro while I was in Belgium and Holland earlier this year... no problems working out values of things... no need to keep changing currencies either...

Three things bother me tho'

Firstly, the rip off aspect. As one who was young (oh to be that age again!) when UK went decimal, we were ripped off by anyone who could in their conversion of rates....

Secondly, as others have said, one interest rate only fits all when all are singing the same hymn ( i.e. like the US of A) and not seeing how they can rip off their European Brothers....

Thirdly, Big isn't always beautiful... I'm still ashamed of the way the UK dumped Australia and New Zealand over the EU and both of those are doing a lot better than us on the goverment bull front...

p.s. any one else think that an EU Presidentship is on the cards for TB if he gets it in?

Jack-oh

>I think we can find out if we are paying higher prices for goods than on Continental Europe by working out the maths.<

Yep, we can, but people don't, and if they do, they sure as hell don't complain, and if they do, they get confronted with crap about the 'uniqueness of the UK market' and other such gibberish. Or simple government protectionism as was given to the CD industry when their outrageous prices were investigated a couple of years back.

I've been in France, Lux, Spain and back in Ireland since the Euro was introduced and personally, I think it was great just having one currency for all of them.

I definitely think the UK is missing out economically long term by not joining and I think those that understand economics best, (ie economists, government, big businesses) recognise this and that is why they are in favour of joining.

As for the point that our interest rates and other major economic decisions will be decided by European politicians, I'd like to make a few points. Firstly, why do people (generalisation) always refer to handing over control to Europe as if the UK has no say in any of it. The UK is representeted in the EU institutions just the same as every other country. Secondly, why do we assume that what is good for the rest of Europe will not be good for the UK. Our economy has diverged somewhat from the Euro zone in the past few years but only because they were adapting to the Euro while we weren't. If the UK were to announce tomorrow that they were going to join, we would experience exactly the same thing as the Euro zone countries - economic uncertainty for a year or two followed by gradual consolidation and strengthening within the new single currency. Thirdly, the US aren't all necessarily "singing to the same hymn sheet". The economy of Massachusetts operates quite independently of the economy of California (for example) eventhough they share a currency and interest rates. Finally, to correct an earlier error, Ireland had a referendum and voted to join the Euro. I'm sure there was a second country that did the same (maybe Portugal). Denmark had a referendum and voted to remain outside.

The other point about interest rates is that ever since control of them was taken over by the bank of england, we, ie the people, effectively lost control of them anyway.
Whether faceless burueacrats are in Brussels or Threadneedle Street, they are still facelss buearacrats, no?

>>>First off, we lose control over our currency and therefore part of our economy. As the collapse of WorldCom has shown, economic collapse in any large Euro-using state would have repercussions on other countries using the Euro.

I don't think being part of the Euro has anything to do with this. If there is a general recession in a country as strong as the US, the UK is badly affected also. Countries (including the UK) are a *lot* more economically dependent on each other than ever before.

>>>Second, although in favour of the EU as a community of nations, I am against a single European state. I think the Euro is a step towards this.

In reality, few countries in the EU would accept a single European state, either now or any time in the near future. The people of the UK would not accept it and the government of the UK will not be allowed to accept it. The adoption of a single currency does not necessarily lead to a single political entity. There would be a hell of a lot of negotiation (and broad-scale attitude change) to enable this to happen. What I expect is that the EU will have far more on its hands in the next 10 years in terms of enlargement, reforming its institutions and dealing with the valid concerns of its member states, than to be following a no-holds-barred route to integration.

>>>Third, Euro notes are horrible things. Pounds look good. (yes, I think this is important :P)

Completely agree with you. Don't think it's important though.

>>>Fourth, nobody wants the Euro except Big Business and a handful of EU politicians. As far as I know, not one of the states that has joined the euro did so through a referendum.

Well as Ballynac said, we in Ireland had a referendum, and I also believe that France had one and some other countries. The Euro enables us to have complete visibility into prices all over Europe, and therefore allows us greater choice, and should help in the long term to control costs over the Euro Zone. You ask most people in the Euro Zone and they will say it has been a good thing, so its not just some faceless politicians.

Woodpigeon

Hi Woodpigeon,

Glad to hear you're happy with your new currency - just as well really!

I used to be pro-Euro, and as the debates in the UK started to pick up, I watched them confidently, expecting hard-nosed economic arguments from the Pros and wishy-washy 'we love the pound' from the Antis. But that's not what I've seen. Neither side seems to have had any real evidence of whether the Euro is working or not, from what I have seen. So my confidence has been badly dented.

Then the recent Argentina thing happened - their whole economy collapsed and people's savings were wiped out. The cause? The Argie peso was tied in value to the dollar.

And, Woodpigeon, isn't Ireland a good example of a country where the euro really isn't working? Aren't the pro-inflation measures required for continental Europe to avoid recession pushing Ireland's already healthy economy into an unsustainable boom?

Gif

PS Even the Euro looks better than that flat-headed guy on the back of the new 20 pound note.

if UK would join the Euro would become one of strongest currencies
and it would be a lot handier.

about price difference give it few years to equalize the diffrences of taxes and when experiences with the Euro.

ok it might never equalize 100%, but will come closer.

Having just read through this thread I would like to make the following comments:

1. Silverfish - politicians do not set interest rates in the euro zone it is the European Central Bank - as Blues Shark said this is no different from the Bank of England setting the rate as there is no democratic control.

2. Sho - the experience in belgium was that there was very little additional inflationary pressure from the change to the euro and very little profiteering.

3. Zagreb - using the same currency as our major trading partners (the EU) would significantly reduce business costs as there would be no currency transaction costs incurred.

In general the no campaign has failed to provide any compelling financial or economic reasons not to join the euro - for me the biggest problem at the moment is that the UK wants to sit on the fence between the US and the EU economic cycles, if we are to be a full member of the EU club and wish to be taken seriously by our EU partners then we need to join the Euro and align our economy with those of our partners.

Yes there are problems in the EU, no the euro by itself does not solve these problems, but not being a part of it means we will never solve them.

Overall the euro, for me, is a good thing and we should get in now.

The example of the Peso and the Dollar is a good example of why even being "tied" to a currency is a bad idea. Imagine how much worse it could be if it was more that "ties".

The Ireland example says it all. Ireland's economy has been very strong, but now they have to deal with continental Europe's problems.

I didn't know Ireland had had a referendum. I haven't heard anything about a referendum in France. The only country I've heard about having a referendum was Denmark. We heard a lot about it in the news at the build up and after. They voted resoundingly "no"

"if we are to be a full member of the EU club and wish to be taken seriously by our EU partners then we need to join the Euro and align our economy with those of our partners."

The whole point of joining the EEC and then the EU was to allign our economies and make trading easier. We don't need a single currency for that.

If the other EU countries don't take us seriously, it's because our politicians just repeat parrot-fashion what Washington says, not because we aren't in the Euro.

remember that Ireland got a lot of financial help from European Union.
the money helped Ireland grow a lot.

I think if got help and because of the help it goes better you need help others.
it is circle of help

I am quite pleased to be able to say that I was around (and working in Retailing) at the time of the British decimalisation and also just after Harold Wilson's infamaous "this won't affect the pound in your pocket" decision.

Trust me, the British public are absolutely trusting on matters of financial conversion. I firmly believe that decimalisation was responsible for a minimum of a 20% hike in prices over a period of less than two years. But decimalisation was essential - can you imagine financial calulations in pounds, shillings, and pence ?!*!

Now a single European currency is not essential. Why do the Politicians seem so keen when at face value a move to the Euro means a loss of their own power and influence at National level?

And when we last tried to tie the pound to the exchange rate of our European "allies", look what happened : we fell off and the injury to our economy took several years to heal. So why on earth do we want to try to jump on again?

And I suspect if you look at politicians' motives, you will start to get a clue as to the way any referendum will be conducted. Politicians deal in power and influence : that is their currency. And I have no doubt they see the Euro as a route to increasing their own power and influence.

So given this carrot, will a choice be given to the electorate - freely and fairly? Oh, please. Take a reality pill. It would seem a little improbable : the issues will be spun and biased as strongly in favour of joining the Euro as can be! Trust me - I'm not a politician!

But I'll predict that by 2005, we'll be using the Euro quite happily as a nation of gullible little shoppers, and that its purchasing power will be around 60p per Euro. Which co-incidentally is roughly the value of the current pound/Euro exchange rate.

So where will the 40p in the pound go?

Again, believe me .... it won't be in the pockets of the shopping public.

Best Wishes to you all from a reformed Retailer!

... and as a PS : Hands up who thinks UK cars will be priced the same as European cars? Get real, people. The price of a commodity is determined nowadays by what people will pay for it. End of story.

Hi Giford,

Re Argentina - I think we must take into account that before Argentina's peso got tied to the dollar, that it was experiencing hyperinflation with its own currency, to the order, I think, of 300% per annum. Also, because the peso was one of the only currencies in South America which was tied to the dollar, and because the dollar was so strong, Argentina became massively uncompetitive relative to its neighbours. What would have been the situation had Argentina's currency been tied to a single South American currency, I wonder? Another factor that you didn't mention were huge internal problems with the Argentinian economy that were not tackled by successive governments, which is certainly a major contributory factor independent of any single currency issue.

Re Ireland - it's a bit of a double-edged sword, really. The low interest rate environment which we have had for a few years now contributed to a big increase in infrastructure spending, helped make Ireland more attractive for inward investment and helped to bring standards up to that of its European neighbours. If we had had the ability to whack up interest rates in line with inflation, I'm not sure if any of that would have happened. The thing is, in a standard currency/interest rate environment, there are bound to be regional disparities as some parts of the economy speed ahead, while others remain stagnant and depressed. But there is an outlet - the free movement of goods and money between countries which will help to reset things over time. And, if the interest rates throughout the region are less inclined to be subject to the huge swings we saw in most countries in previous decades, then regional disparities and huge boom-bust cycles will over time be lessened.

This is a huge, long term project - the data is not there yet to say whether it has been a bewildering success or an unmitigated disaster - we might need at least 20 years to come to any decision on that.