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A few good economic reasons for joining the Euro and ditching the pound
1. A BETTER DEAL FOR CONSUMERS
The euro is finally completing a US-size single market in Europe, and ending companies ability to charge the highest price each national market will bear.
US-style competition in one big market will end rip off Britain and give consumers year-round bargain basement prices. Already, big companies like Unilever are aligning their prices for goods like ice cream and soap powder, which can vary by as much as 30 per cent from one euro-zone country to another. Outside the euro-zone, Britain will continue to lose out.
2. REAL SOVEREIGNTY OVER OUR MONETARY AFFAIRS
If we get rid of sterling and adopt the euro, we will also get rid of sterling crises and sterling overvaluations. This will give us a real control over our economic environment.
Our manufacturers, farmers and other trading businesses would be able to rely on the exchange rate against our main continental trading partners staying unchanged forever. That would in turn mean that interest rates would not have to be raised sky-high to protect a plummeting pound, which is what has usually happened after periods when the pound is over-valued as at present. Remember that in 1986 Nigel Lawson had to hike interest rates not because of domestic economic conditions but because the pound threatened to fall to one-to-one against the dollar.
3. INVESTMENT & JOBS WILL GROW WITH EURO MEMBERSHIP
Businesses will invest more because they will face fewer risks from volatile exchange rates. At present, foreign direct investment is staying high because companies believe that Britain will join the euro. But if we fail to do so, investment could plummet. Japanese businessmen are now increasingly blunt about the need for Britain to join. As Mr Hiroshi Nemichi, chairman of Mitsubishi Corporation (UK) plc says: ÎIf Britain were to rule out membership of the single currency, as the anti-Europeans seem to want, Britain would be less attractive to inward investors.
4. BRITISH BUSINESSES RISK BEING SIDELINED OUTSIDE THE EURO
The biggest British businesses like Unilever, Shell, BP Amoco, Vodafone Mannesman will effectively become eurozone companies, doing most of their accounts in euro anyway. The eurozone market is a bigger slice of their turnover than the UK. There is now a merger wave going on in Europe as businesses try to operate on a continental scale: last year, the total value of mergers was more than 1 trillion euros, six times the level of the last peak.
But medium sized UK companies cannot take advantage of these trends. Their costs continue to be in sterling, even though they are increasingly forced to invoice in euros. Yet they cannot merge to get bigger economies of scale in the same way as their continental rivals because they would still be exposed to the ups and downs of the exchange rate in their main market. They therefore face the disadvantages of an independent currency without the advantages.
5. SAVINGS ON CURRENCY CONVERSION
Every tourist knows how their money dwindles in value when they convert into foreign cash for a holiday, but the same problem hits businesses every day of the week.
And transactions costs even for the biggest clients and both Mars and Tate and Lyle have complained - have become sharply higher since the euro was introduced as there is less competition in the UK-euro market. These savings alone will be worth about half a pence in every pound produced in the UK.
6. MORE PROSPERITY FOR THE CITY
The City would have the potential to become Europes financial centre, not just a big offshore centre. Although the City is doing well from the growth of the eurobond market, and from the mergers boom as europes businesses consolidate, the real prize will be a single market in financial services. This will allow British-based financial institutions to provide financial services all the way across the continent, effectively turning London into the New York of Europe. Yet that prospect which needs agreement on EU legislation - is much less likely if we fail to participate in the euro.
7. BETTER PENSIONS
Although old people often worry that the euros lower interest rates will hit their income, in fact pensioners would benefit. First, the value of their shareholdings in pension funds will tend to rise as interest rates fall. Secondly, pension funds will be able to spread their risks around the wider euro-zone, creating larger portfolios than ever before. This will reduce their risks and increase their returns and hence their pensions.
8. THE EURO IS A WORLD CURRENCY
The US Treasury saves more than $10 bln a year because foreigners hold dollar bills effectively a free loan. As the euro becomes established, foreigners will also hold euros, making european governments a free loan. The euro has already become a major currency in which to borrow money: issues of international bonds denominated in euro rivalled dollar issues last year.
9. N0 EUROPEAN SUPERSTATE
The euro does not imply a european superstate. Ireland and Britain were in monetary union from 1921 to 1979, a period which encompassed such independent exercise of Irish political sovereignty as the end of Dominion status and neutrality in a war in which Britain was fighting for its life. Belgium and Luxembourg have been in monetary union since the twenties, but have entirely independent political systems. And between 1880 and 1914, the gold standard was effectively a world monetary union without any world government at all. Money is a convenience to make us richer, not a piece of national bunting to be waved. The Euro is just another word for cash.
10. ONE INTEREST RATE FOR A WIDE AREA WORKS
Setting one interest rate and one exchange rate for a wide area like the Eurozone the so-called one size fits all already works in an area just as big, the United States. There are plenty of ways economies adjust without needing separate interest rates and exchange rates.
11. FINALLY
Furthermore, the euro has now become the international currency of choice as the dollar slides.
Of course, this could change, but in the euro, 90 per cent of our economic activity would be carried out in one currency, and crises such as that involving Northern Rock could be more effectively managed as part of a larger currency area, in the same way that the bigger the ship, the less choppy the sea seems.
The pound has lost about six per cent of its value against the euro this past couple of months - a potentially catastrophic change for businesses working on narrow margins.
Its time to ditch the loyalty to the pound and plan now to join.