♠ Posted by Emmanuel in Europe
at 12/11/2008 10:12:00 AM
As a residual holder of now rather worthless British pounds, I am once more voicing my unequivocal displeasure over Britain's reluctance to join the European currency union. With respect to this kind of Europhobia at least, Gordon Brown is Tory-like. Witness the infamous "five tests" devised by Brown and Ed Balls regarding the viability of Britain adopting euro currency. Naturally, these tests have always struck me as deliberately skewing towards non-adoption.
The credit crisis has demonstrated Britain's vulnerability as a comparatively small open economy running (ho-hum) large deficits. It's even been likened to a British Iceland. As with many other countries sharing this condition, the UK is vulnerable to runs on its currency--or so thinks Tory Shadow Chancellor George Osborne, who has warned of a possible run on the pound. At a time when countless Eastern European countries now rue their decisions to put off adoption of the euro, many economic commentators are doing the same for Britain. Witness the FT's Willem Buiter [1, 2, 3] and the Economist Free Exchange, among others.While doing some research for the previous post, I came upon an absolute gem of an artifact: a site selling pattern coins for the British ECU. The sales blurb goes like this:
As the European Economic Community, or the European Union made its moves towards a common currency, the ECU came into being. Although at first the ECU was a unit of account, it had long been expected to be converted into a circulating currency. In most European countries there were pattern coins issued exploring the design possibilities of the anticipated new coinage. Some of these issues were design exercises carried out by official mints, others were privately issued.These coins were minted in 1992, when George Soros speculated on the pound and "broke the Bank of England" (perhaps similar to the current situtation when, er, the Bank of England is broke). Back then, it was perhaps more conceivable that Britain's future lay more in the Eurozone despite the Soros-induced setback. Arguments by the economic commentators above and suchlike have still not persuaded British Eurosceptics--there are legions of them--about the virtues of adopting the common currency. To them, the cost of lost policymaking efficacy does not adequately compensate for the benefit of becoming insulated from a run on the domestic currency.
As ever, I remain convinced that the time is never too late to join up. Certainly, the politics in Britain are against this possibility. Brown's likely Conservative successors will share his dislike of the euro. More pragmatic sorts like yours truly will always view things differently. Britain had several opportunities to ditch the anchronistic pound in favor of the shiny and new euro. Explaining regret is simple: you had euro currency in your hands, but you let it all just slip away.
UPDATE: MarketWatch has a feature on the euro at 10. Strictly speaking, this is inaccurate since physical euro currency only went into circulation in 2002. Nonetheless, there's another story on why Britain should ditch its Europhobic tendencies and board the euro train.
