The Euro - Britain moving closer?

Blair clearly wants UK in the zone. And if Brown appears sceptical right now it's certainly not for ideological reasons. But the govt. has much still to do if they want to secure a yes vote in a referendum in 2005 or before.

The argument Nick quotes was put forward by a good many people circa 1973-75 arguing that the sudden increase in the price of *everything* was down to decimalisation. Of course it was actually down to other factors, not least our entry into the EU and the resultant effect on our economy.

I'm very pro-euro myself, for many different reasons (mainly because the two other options for Britain - isolated little island and America's poodle - are impossible and terrifying respectively) but a thought hits me: is there anyone who knows that the new Britney and DMX albums charted higher in Germany than in Britain who actually opposes the euro? Because it strikes me that a lot of kneejerk europhobia is based around the idea that we share a culture with America and "they" don't, when of course the truth is that so do all the countries at the heart of the EU, so that idea of a fundamental difference between Britain and mainland Europe is founded on a lie (though it was a truth when the EU was founded in the 50s, and still a partial truth when we joined in 1973).

You cannot *imagine* how happy I would be if Richard Littlejohn was shot dead tomorrow.

Strong words there! But I gather he's worth the price of a well-placed bullet...

Yeah, but these people weren't even that reasoned. I mean yes, as with decimalisation, you are probably going to get marginal rounding up of prices rather than rounding down by nasty retailers. But they weren't talking about that, as I understood it. They seemed to think that because one euro is worth about 60p or whatever, that if we switched to the single currency then overnight our savings would be reduced by 40%. To which there was an embarrassed "err.. NO - duh!!" from the studio panel.

The Europa sites "citizens guide" v helpful... NOT. Bizarre and to be honest I am not interested in how they came up wif the pretty colours. And half the site isn't working. Harumph. Anyway, I do not really know half of what I am on about but isn't not being in leaving the pound in a rather unstable position? ARGH I am going to shut up now, will the branefaces take it from here?

Top Shop = Voice of Youth = Pro-Euro, hurrah.

I'd have thought that Emma's euro price tags only apply if the items are being sold in a eurozone country. You could pay in euros but it would be converted at till at the prevailing rate. Only way you could take advantage would be by playing the currency markets, buying some euros in advance and then hoping the pound weakens against the euro before you swooped to your Top Shop purchase.

I don't really follow your logic, Alan. Removing the exchange rate fluctuation doesn't mean the risk has to be transferred anywhere. It's not a zero-sum equation. I suppose in principle the benefits to European business might be gained to a small degree at the expense of other countries' companies. But I don't think that would be a big thing. i can't believe the reason for exchange rate changes will disappear otherwise why not just fix rates instead of having a single currency?

This just isn't eoncomically possible - you need the free flow of money across countries, which determines the exchange rate. Countries can opt to fluctuate only within certain boundaries, but this can only be achieved indirectly, by the government's interest rate policies and by using reserves to buy into your own currency in times when it's getting out of control. But ultimately, you can't buck the market in this respect, as Britain's ERM crisis showed. If you want completely fixed rates, you have no option but a single central bank having control over interest rates. The last two years has seen this happening, as the euro has existed in all but notes and coins form. In this time, the franc, DM, lira et al. have effectively jsut been subdenominations of the euro. What's happening next year is not really the big deal. Psychologically it is, but not in economic terms. It's already happened.

Like I said, I'm not an economist, so anyone feel free to shoot holes in the above explanation.

so where does the risk go? to the public arena? job stability?

I don't really follow your logic, Alan. Removing the exchange rate fluctuation doesn't mean the risk has to be transferred anywhere. It's not a zero-sum equation. I suppose in principle the benefits to European business might be gained to a small degree at the expense of other countries' companies. But I don't think that would be a big thing.

i can't believe the reason for exchange rate changes will disappear otherwise why not just fix rates instead of having a single currency?

This just isn't eoncomically possible - you need the free flow of money across countries, which determines the exchange rate. Countries can opt to fluctuate only within certain boundaries, but this can only be achieved indirectly, by the government's interest rate policies and by using reserves to buy into your own currency in times when it's getting out of control. But ultimately, you can't buck the market in this respect, as Britain's ERM crisis showed. If you want completely fixed rates, you have no option but a single central bank having control over interest rates. The last two years has seen this happening, as the euro has existed in all but notes and coins form. In this time, the franc, DM, lira et al. have effectively jsut been subdenominations of the euro. What's happening next year is not really the big deal. Psychologically it is, but not in economic terms. It's already happened.

Like I said, I'm not an economist, so anyone feel free to shoot holes in the above explanation.

it's just a rule of thumb for me, but if private businesses are calling for something to make their fiscal lives easier, then it makes me think that the chances are it's not a good thing for private citizens. and if i want anything to take the risk it's institutions/businesses/corporate entities rather than in the personal/democratic arena.

i know there's no real distinction between the two when you look closely, but i want it at "that end of things" (so to speak) cos private businesses are always tring to dump their risks and costs on the public sphere where poss

It's as simple as this: currently businesses don't know what their currency is going to be worth against their European customers, suppliers, and non-domestic plants/subsidiary companies' currencies in the future, so long term planning and investment decisions are subject to exchange rate risk, which is likely to impede performance and general economic growth. Europe becoming a single economic bloc means that this risk disappears in a cloud of smoke. You're not shifting the risk onto anyone. That risk just disappears. In the same way as car theft suddenly ending would remove car theft risk.

I've totally lost track of which countries now have the euro. I found out my handy BAFFLINGSIP mnemonic was out of date because they'd let Greece in and I've no idea if there have been any new adopters since then.

As of 1st January, Slovenia joined, so Euro-12 became Euro-13.

Shurely BAFFLING PIGS (for Euro-12) is a better mnemonic. Is SPIGS a word?

Oh it will eventually. I think having our own currency when all the other EU members share one will be a tricky position to sustain. Who's next to join do you think? I can't see Czech and the Baltic republics staying out of it much longer.

As far as economic effects; Italy is discovering that it has to get one fiscal policy other than devaluing the lira every time thei economy is in the crapper. Italy (or at least the louder political parties) is talking about leaving the euro so it can do just this.

xpost

Love, Mark.

the bank of england do seem keen on keeping a strong pound, right? this is the impression i get. is there high up timidity because of this and its relation to the UK's main 'industry', financial services?
-- benrique (Enrique), Thursday, January 4, 2007 7:22 AM (1 year ago) Bookmark Link

a strong pound? artificially low rates dont help a currencies strength!

BoE have only one goal and that is inflation targets. They aren't allowed to consider anything else when setting interest rated (strong pound - cheap imports - lower inflationary pressure is as far as it can go)

Really? ....really?????

Also...re:the euro

pound is record lows against euro and ecb seem somewhat more serious about inflation than the BOE, but..

can the eurozone weather the storm? ie while the euro may be at highs its only highs against the tinpot currencies like the pound and dollar - plus it has to carry dead weight like Spain, Eire and Italy - can the Germans really carry them all? And while Germany still actually makes things its own banks seem pretty exposed

Still at least they don't have Iceland in there

god remember all the speculation about this in labour's first and second terms, brown's 'five tests' etc., press guessing which year the government were going to take us in cos apparently they were intent on doing so. seems a world of relevance away now.

It would have been interesting to see how things would have panned out if we had been in Euro for the last 2 terms. Considering they had pretty much constantly lower rates than even the UK would the credit bubble have got even more out of control here if we had been in Euro?

so, well, yeah.

http://www.guardian.co.uk/commentisfree/cifamerica/2010/feb/15/greece-europe-single-currency

not sure what laxalt was saying up there, re the tinpot dollar and pound. at any rate, i was right, the pound was strong back then.

http://ecx.images-amazon.com/images/I/41JHF0M1J2L._SL500_AA300_.jpg

Dodged a bullet.

tbf not all countries in the Euro seem to be in as deep as Ireland, etc. How's Germany doing?

Germany's a big economy with a lot of power within the Eurozone, Ireland isn't. I'm not sure what your point is really.

Also I'd imagine that as a country with a sizeable manufacturing sector having a weak Euro is doing them quite nicely.

a noob asks: why isn't the French economy more powerful?

they all retire at 55 or something.

Germany's a big economy with a lot of power within the Eurozone, Ireland isn't. I'm not sure what your point is really.

Well, I so rarely have one, but my point was just that really, it's not so much the Euro at fault, but the economic make-up of the country?

France is near parity with Germany on a GDP/capita basis:

http://www.cbs.nl/NR/rdonlyres/3D38CFAF-1237-4BC6-A631-38E132F40374/0/E2612g1.gif
(adjusted for price parity)

Well, I so rarely have one, but my point was just that really, it's not so much the Euro at fault, but the economic make-up of the country?

It's a bit of both, the economic make-up of the country is primarily the problem but the set of conditions that Euro membership locks you into don't help either.

Although Euro membership also means that other Euro economies are more inclined to give you loads of cash/bail you out if need be. I honestly have no idea whether Ireland would be better off had it never joined the Euro.

It's hard to know... I mean, maybe without the Euro we would have seen our currency collapse in value, which would mean that everything we import would become incredibly expensive. This would not even aid our exporters that much, as most of them import their inputs.

One thing you hear with the Euro is that different european countries are out of synch with each other - e.g. one country will be doing well, another badly, and having once currency becomes problematic. But would this not happen in other big countries with one currency, like the USA?

In the US movement of labour balances things out over time. Labour is much less fluid in the Eurozone.

Just fwiw I buy most of my stuff from the UK now, because even with shipping across nine time zones and a hemisphere it's about half the price of what I can get in a shop. Everyone wins except perhaps the UK.

surely the UK likes you buying their stuff?

now's the time

Britain was right to avoid the Euro, but for the wrong reasons.

i.e thinking like this

http://cdn.images.dailyexpress.co.uk/img/cartoon/506x345/2010-11-25.gif

oops

http://cdn.images.dailyexpress.co.uk/img/cartoon/506x345/2010-11-25.gif

He demands his country back? Where is he standing?

hey the euro turned out to be a p horrible idea huh guys

I was kinda ambivalent about the Euro all along but its slow failure is making some pretty reprehensible people very happy.

the euro was a good idea, i think, it's giving ppl the vote that was fuckin crackpot stuff

I was kinda ambivalent about the Euro all along but its slow failure is making some pretty reprehensible people very happy.

― Matt DC, Tuesday, June 21, 2011 5:01 PM (2 hours ago) Bookmark

*nonchalant shrug*