The Euro, is it now time to join in?

[iranu]

well.. what harm will it do if we do join in?

Look at Spain.

Brussels expects Spanish unemployment to reach 19pc - or 4.5m people - by late next year. This is a depression.

http://www.telegraph.co.uk/finance/c...for-Spain.html

The bloke from the guardian hasn't said how joining the Euro would help. Why on earth would they want to take on a country with so much debt?

Massive overspending and taxing by the government coupled with an extra million people employed by the state, selling off gold reserves at rock bottom prices, expanding the money supply, artificially keeping interest rates too low for too long, splitting the BoE into a tripartite including the toothless FSA, too much redtape for the private sector, etc has basically meant that Britain has got very little left. Labour won't cut government spending (unless it's defence because we are at war and they don't like soldiers) because it's only in their DNA to expand government. Reducing interest rates (which are as low as we can go) and printing money is all that's left. Join the Euro? They wouldn't take us.

[TheAnimus]

I don't normally like Ambrose's articals, but thats not bad at all!

[Saracen]

Britain will accept the Euro when the notes have the queens head on one side and a spitfire on the other.

Though that made me laugh, my personal criteria would be "when the BofE sets interest rates for the Euro zone" ..... and I'd confidently predict that that will be about three weeks the far side of never. But it's nowhere near as comical a way of phrasing it, though I guess it amounts to much the same thing.

I suppose it's conceivable that circumstances will change to the point where it becomes a good idea, but there are so many huge economic and political issues involved that I can't think what it would take to get to that point, or that it'll come in my lifetime.

I'm not saying that joining the Euro won't come in my lifetime, because that'll be decided by politicians who generally don't actually bother to listen to the people, let only get my permission .... unfortunately.

I'm saying I can't see the time coming where I'd agree it's a good idea, though I acknowledge the theoretical possibility.

[Stewart]

Britain will accept the Euro when the notes have the queens head on one side and a spitfire on the other.

My personal choice for the design would be Henry V riding triumphantly across the battlefield at Aqincourt, the dead Frenchmen around him illuminated only by the light of the 1966 Jules Rimet Trophy, hanging in the air as a great comet, which is held aloft by Alfred the Great, his other hand holding a large scroll made from the uniform of a defeated Nazi stormtrooper, containing on one side the text 'England confides that every man will do his duty' and on the other a witty Shakespeare-esque rhyme, casting aspersions on the sexuality of Napoleon Bonaparte, Kaiser Wilhelm II and Harald Hardrada.

From the left of scene a giant, winged beast, with the head of a british bulldog, holding in it's claw the skull of Adolf Eichmann, and riden by Arthur Wellesley, 1st Duke of Wellington, his sword held aloft, ready to slice the head from a cowering German sealion, dominates. The entire scene overlooked by Vice-Admiral Horatio Nelson, the victory medals on his chest encribed with 'Two World Wars And One World Cup' in all the languages of the Euro Zone, as from his position atop the rotting corpse of Charles X of France, he observes the still smoking remains of Berlin in late 1945, against which the scene is silhouetted.

[TheAnimus]

pics or lies tbh.

[iranu]

My personal choice for the design would be Henry V riding triumphantly across the battlefield at Aqincourt, the dead Frenchmen around him illuminated only by the light of the 1966 Jules Rimet Trophy, hanging in the air as a great comet, which is held aloft by Alfred the Great, his other hand holding a large scroll made from the uniform of a defeated Nazi stormtrooper, containing on one side the text 'England confides that every man will do his duty' and on the other a witty Shakespeare-esque rhyme, casting aspersions on the sexuality of Napoleon Bonaparte, Kaiser Wilhelm II and Harald Hardrada.

From the left of scene a giant, winged beast, with the head of a british bulldog, holding in it's claw the skull of Adolf Eichmann, and riden by Arthur Wellesley, 1st Duke of Wellington, his sword held aloft, ready to slice the head from a cowering German sealion, dominates. The entire scene overlooked by Vice-Admiral Horatio Nelson, the victory medals on his chest encribed with 'Two World Wars And One World Cup' in all the languages of the Euro Zone, as from his position atop the rotting corpse of Charles X of France, he observes the still smoking remains of Berlin in late 1945, against which the scene is silhouetted.

Christ on a bike the tenner would be A4 size! I actually think we have quite good notes in the UK, although I wish they'd do what the Aussies do and use plastic because they are virtually indestructible and un-copyable.

[Repressor]

I'm totally against the Euro.

Why would we join at such a bad time? Our currencies are/were practically 1:1. We'd gain more if we joined at a better time such as when the pound is like 1:1.7. Even then i really wouldn't want to join the Euro zone. There aren't enough positives to outway the negetives.

If anyone can name a good positive?

[Englander]

What are the actual positives of joining the Euro?

[mdjmcnally]

Normally what you get to that is we don't have to change our currency when we go on holiday.

Personally I would like to see the EU as it was when it was the common market, a grouping of countries with some common policies. So far none of the pro Europeans has come up with a convinving statement as to why it is needed.

The United States of Europe doesn't work for me as too much history between the different nations.

Also there would need to be real accountability for me, along with the dropping of the common agricultural policy as it costs a fortune, for no real need these days.

Until there was a definitive statement of what a USE would entail then I would vote no.

People voted to join the common market, not the EU as it is now. Most people I know say that if they had known how would go then would have voted no then.

I am also put off very much by the arrogance of the EU. I remember when the Irish voted no on the EU constitution/Treaty of Lisbon and the EU said that they will just have to vote again till they get the right vote. With Democracy like that I would rather invite old George W Bush over to run the place.

[Saracen]

What are the actual positives of joining the Euro?

There's a lot of implications of joining the Eurozone, but with some of them, whether they're advantages or not depends on how you look at it, what the future holds and on a subjective assessment of desirability.

For instance, the Euro is a major step towards ever-greater political union, towards tax harmonisation, and so forth. It means that interest rates will be set at an EU level, and not at a domestic State level. So is further integration either advantageous or desirable? Well, it might, for instance, mitigate against inflation, by spreading stability from a much larger economic block. But on the other hand, if other portions of that block experience economic troubles, it can drag us into a problem we otherwise wouldn't have.

That one facet could be positive or negative, and it could be positive right now, but negative in a few years time.

That's what people like me are talking about when we talk about loss of sovereignty. If we blend even more aspects of our economy, it will certainly add a degree of spreading the load and risk (which is an advantage), but it will also risk importing problems, and certainly remove a fundamental plank of government policy and their ability to react to them (which is a disadvantage).

And there are a LOT of factors that can be viewed like that.

Clearly, if it were possible to come up with absolute, quantified, guaranteed answers to much of this, there'd be a lot less argument about whether it's good for us or not, with a lot of both bright and experienced people on both sides of the argument.


Among the most often mentioned benefits are that it reduces transaction costs for businesses dealing with other European states, and that it reduces risk too. If you're a business and you sell to another European company, the odds are that weeks, possibly months, go past in the period between you accepting an order and getting paid for it, especially if it takes weeks or months to manufacture. If you have separate currencies, then by definition, they can change in relation to each other during that period. If, therefore, you have a 10% profit margin built in to the sale, and currencies change in relative value during that period, someone will gain and someone will lose out as a result of that change, You might even find that you end up making a loss on the deal, purely because of currency variations. So, as a business, you have to take stops to mitigate against that risk, which either drives up your margins (making you less competitive and perhaps meaning that you lose the business altogether), or you incur other risks by insuring against it or hedging your bets by selling the other currency now, etc.

Businesses dealing across currency boundaries incur both costs and risks because of it. That it would eliminate those risks and costs, with respect to Eurozone countries, is indisputable.

But the UK has a structurally very different economy to much of the Euro zone. We are far less based, for instance, on agriculture (and IMHO, that's probably a mistake) than many, and far more based on services, finance, etc, and also less on manufacturing. For the last decade, that's worked very well for us,, but in the current situation, it's going to be a problem and, in my opinion, is largely behind the fall in the pound in recent months.

Had we been in the Euro, we certainly wouldn't have lost value against the Euro, and presumably not against the dollar either. So that would have been a benefit .... short-term. But if we were in the Euro, would we have got the benefits we've had for the last decade? Doubtful. And will we get benefits from a floating currency in the future?

Well, we're getting some right now. The pound dropping certainly makes imports more expensive, but it also makes exports cheaper. I'd expect that to help, and maybe save some companies that are currently struggling. It also helps suppress demand for imported products, which helps the balance of payments and, if people aren't spending, will contribute towards savings, and towards paying down of the huge level of private debt (like credit card debt) this country has.

So again, in that one area, not being a Eurozone member has advantages and disadvantages. Only time will tell whether, in that area, it's a net gain or net loss.

Another structural difference is the "special relationship" with the US. That isn't just diplomatic. It's also trade. We have a far higher trading relationship with the US than most of Europe, and a far higher degree of inward investment too. Lose that investment and we lose lots of jobs. But why do we have that investment? Is it because of the [pound v Euro, or it is because of a common language, or a more closely allied cultural and historical set of links, or all of this and more?

Would we lose out on that relationship if we submerge ourselves in a ever more tightly integrated Europe? Is that investment because, for instance, we still distance ourselves from a lot of the regulation that the EU shoves on EU members? If we join the Euro, we make a significant difference to the progress in that EU integration because, as still one of the larger economies in the world, we enhance the Eurozone, and EU, status significantly if we do join. So the question becomes, in my opinion, do we want a United States of Europe? Because that is what the EU, and most especially the Euro, are all about.

And like everything else, it has advantages and disadvantages.

The short answer to your question is that there's no easy, or short, answer. Most of the things we gain also mean a loss, or are mitigated against in other ways.

[Englander]

The short answer to your question is that there's no easy, or short, answer. Most of the things we gain also mean a loss, or are mitigated against in other ways.

Good Lord, firstly, thanks for typing out that answer; it was very informative

Interestingly, Nigel, the leader of UKIP, came and spoke to my year group today and spent the best part of 45 minutes talking and explaining why we should get out of the EU, let alone joining their currency. A lot of his points have been covered in this thread already but one that stood out and is relevant to a part in your post is this:

"Had we been in the Euro, we certainly wouldn't have lost value against the Euro, and presumably not against the dollar either. So that would have been a benefit .... short-term. But if we were in the Euro, would we have got the benefits we've had for the last decade? Doubtful."

For 7 out of the last 10 years, £ interest rates have been a decent 2% above that of the €. Whilst this is bad in the sense that our mortgages were a tad more expensive, it also apparently meant that our house price bubble was less than if we had adopted the Euro. Now, I'm no economist so I'm not sure how exactly that works nor do I know if Nigel was just claiming that was the case to make his party seem more appealing. Essentially his point was that the current husing situation would be worse than it currently is if we were in the Euro.

Another point about the EU which he made was that 75% of new laws in Britain are made by the European Commission, in the interest of EU (i.e. not tailored to each country) and that under our agreement, we have just about no say in which European laws we do and do not accept. (I realise this has little to do with the Euro, but I found it interesting so I thought I'd share it ) Ironically, I just stumbled across this video (top of page) in which he says what I just wrote, about 50 seconds in. http://news.bbc.co.uk/1/hi/uk_politics/7600575.stm

[Saracen]

.....

For 7 out of the last 10 years, £ interest rates have been a decent 2% above that of the €. Whilst this is bad in the sense that our mortgages were a tad more expensive, it also apparently meant that our house price bubble was less than if we had adopted the Euro. Now, I'm no economist so I'm not sure how exactly that works nor do I know if Nigel was just claiming that was the case to make his party seem more appealing. Essentially his point was that the current husing situation would be worse than it currently is if we were in the Euro.

With this, as with most economic arguments, you get the same effect I referred to above, which is that things tend to act in different ways, some good and some bad.

I haven't listened to Nigel Farage's argument, but I'd guess it could go like this ....

The housing market was a bubble. House prices were rising, making people that owned houses feel wealthy, because they were going up, often by more per annum than people earned, and it felt like a second income. Suppose you earned £30,000 a year, but you have a house that starts the year a £250,000 and is £290,000 by the end of it. It feels like you've made £40,000. But in reality, you haven't. Any asset only has a notional value until you sell it. What are shares worth? It depends on the stock market on the day (and minute) you sell. What's a car worth? It depends on the car, how old it is, how many buyers are after it and perhaps most importantly on the respective negotiating skills of buyer and seller. In other words, it's worth what you can get for it. What's a Chagall oil painting worth? It depends on the picture, the market at the time and again, really comes down to what a buyer will pay.

So whether it's a second-hand car, a Grand Master painting or a house, you don't really know what it's worth until you've sold it. But with a house, you have to live somewhere. Unless you're downsizing, moving to a much cheaper area or perhaps emigrating, a house has only a notional increased value, because whatever increase you get when you sell, it'll cost you a broadly similar amount on the replacement you buy.

So that £40,000 notional increase in value is, largely, theoretical.

However, because prices were rising, (almost) everybody wanted to get on the ladder. For some, it was because they thought they were buying a sure-fire appreciating asset. For others, it was because they thought they'd be priced out of the market and if they didn't buy soon, they wouldn't be able to afford to buy at all.

Rule 1 of Economics, price is determined by supply versus demand. That's simplistic, of course, but basically, if demand > supply, prices rise.

The supply of houses, in the short term, is fairly fixed. It takes a fair bit of time to build extra ones, especially in any quantity, and it take a lot of money. It also takes land which, at least outside greenbelt restrictions, is a fairly limited commodity. So if supply if fairly fixed, and demand is high, prices will rise.

But for most people, demand will only be high if they not only want to buy, but can. And they can, if and only if they can get the finance, because most people can't buy without finance. So they need a mortgage. And what's the 'price' of finance, the 'price' of a mortgage? Well, clearly, it's the interest rate.

It should be clear by now where this is going, in relation to your question.

The higher the interest rate, the higher the monthly repayment you have to make. Given that you have a fairly fixed income (because for most people, salaries or wages only go up once a year, and by modest amounts at that), interest rates can be used to choke off demand in the housing market. If you hike rates up, monthly repayments go up, and as incomes don't, that means that the amount you can afford to borrow has to go down, because the cost of borrowing it has gone up.

If you need £x,000 to buy a house, and the most you can afford to repay is £1000 a month, then that payment at the current interest rate, tells you the most you can afford to borrow, and therefore to spend. If interest rates go up, and borrowing that £x,000 will now cost you £1200, you can't afford it, so you'll have to lower your sites and buy a cheaper house.

As soon as you expand that individual issue to the whole market, you see the effect of higher interest rates. The amount people can, in general, spend will go down as rates go up because they just can't afford to go beyond a certain point. So if what people will pay goes down, then demand and that price point goes down, and given that it's the excess of demand over supply that causes price rises, then so prices won't rise as fast. And if interest rates are hiked up far enough, prices will actually start to fall.

In a way, that's the problem we have now. It isn't that interest rates (the price of money, remember) are too high, but more that because banks have so heavily curtailed lending, many people just can't get mortgages PERIOD. And so, demand has fallen, so house prices fall.

The bigger problem is that people were taking out huge amounts of rather transient finance, for cars, holidays, and credit card debt, reassured by the fact that they were "making money" on their houses. It's that "second income" effect I mentioned. Does it really matter if you have £20,000 on the credit card if the house has gone up by £100,000? It does if you can't remortgage, can’t sell the house because there are no buyers because nobody else can get mortgages either, and the value of your house is now dropping instead of going up.

So back to Nigel Farage. If we had been in the Euro, and interest rates had been lower in recent years, then the inference is that people would have been able to borrow more because the repayments would have been lower than at our higher rates, and because they could borrow more, that would have fuelled even more house price inflation than we actually got. We would still have had a bubble, but it would have been even more over-inflated than it was.

This is one of the reasons I've given time and again for objecting to the UK joining the Euro. Interest rate changes are one of the fastest-acting tools of government policy. If rates go up (or down), it hits people in the mortgage payments within weeks, and though full effect takes a long time, it starts quickly and has a psychological effect too.. So governments can make fairly rapid changes with interest rates, under normal circumstances, which is certainly not what we've got right now. Most other tools, like tax changes, can take months, or even a year or more, to take effect.

But if we join the Euro, then interest rate decisions are made by the European Central Bank on the basis if the needs of the 16 countries in the Eurozone, not by the Bank of England on the basis of the needs of the UK. The UK is a LOT more exposed to interest rate changes than most other Eurozone members by virtue of the extent of private ownership of houses, so we are far more sensitive to interest rate changes. It is very conceivable that a change in interest rates that has a relatively small effect on most Eurozone states has a much larger effect here, so a policy that makes sense there (because of that minimal effect) has a much larger effect here and so is undesirable.

If we join the Euro, we sign up to losing that fine tuning fast-acting tool in the UK, and we also sign up to being affected by Eurozone-wide policy instruments that affect us disproportionately heavily.

In my last post, I pointed out that being in the Euro would lower transaction costs and risks for businesses exporting to other Euro states, and it would. That's part of the upside. But the impact of interest rate policy , and the mere fact that we lose control over it, is a very major downside.

As far as I'm concerned, the downside significantly outweighs the upside, until and unless the UK economy is synchronised FAR more closely with that of the major Eurozone players. And that hasn't happened, and with the current crisis, if anything, we're deviating further and further from any correlation.

That, by the way, is one of Gordon Brown's famous five criteria for Euro membership, and is one of the ones that Brown says we still haven't met. Apart from the sheer stupidity of trying to join the Euro block during a financial and economic crisis like the one we're in right now, that's one very major reason why the answer to the question in the thread title is 'hell no'.

[Englander]

Superb answer again! Thanks All I can say is "I agree"

[AdamAnubis]

Sorry Saracen, but I'm not in the mood to read all of that post

Just thought I'd put my views in - although I'm not an economist so not entirely sure one everything (although saracens shorter posts helped).

From what I've been reading, although it's bad, it could be alot worse. As with much of the news, alot of it is just over-hype to sell papers and get views. Although the pound has slumped, it's not in a dire situation yet. I was reading somewhere (The Times I think, not sure) that the pound will be making a bounce back fairly soon - or atleast a few countries are expecting it to. It's bad, but it's been worse.

Accepting the Euro will have more than just Economical effects - imagine the social implications? The moral would drop, or the opposite and riots break out (extreme but not unlikely). If 71% doesn't want it, then for once, listen to the nation. After all
"People shouldn't fear their governments, Governments should fear their people."

It will take alot more than this to get the Pound down and out. And until then, I think we should keep on fighting for it unless something coems riding in on a shining horse for the Euro.

Besides, if all else fails, we could go back to shillings and see how that works out?

[Saracen]

There are a number of countries in the Eurozone whose peoples are now blaming the Euro for the depths of their current troubles, and at least in part, correctly so IMHO.

The PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) lead the charge, and there are some loud voices in them arguing for leaving the Euro. Of course, there's voices in them arguing it would be compounding one disaster with another if they did.

Believe me, though, all is not not sweetness in light in the Eurozone, and in particular, it seems to be a hot topic in Greece at the moment.

I made the point earlier that, in relation to the UK, there would be benefits to being in the Euro, though IMHO, significantly outweighed by the disadvantages of being in and the advantages of not being in. But many of the same reasons apply to those countries that have joined, most significantly, the problems the PIIGS countries are having made worse than they perhaps need be by virtue of not having control over interest rates.

It comes back to what I said about economic cycles. The UK is not the only country that is not in sync with the Eurozone economic powerhouses of France and Germany. Some of those PIIGS countries have seen significant benefits from EU membership, and probably from Euro membership too .... but now it's coming home to roost.

Just as the UK has lost out, for instance, on the risk-spreading effects of a single currency, we've gained economically at the moment from a weak pound being able to discourage imports and make exports more competitive. So some sectors in PIIGS countries (love the acronym, by the way ) are suffering because the strong Euro makes them internationally less competitive.

This proves at least one thing beyond doubt ..... EMU membership is not a one-way street in benefits. It has advantages, but it sure has disadvantages too. In my view, the cons far outweigh the pros, at least for the UK and for the foreseeable future too.

[thunder12]

In my opinion it is indeed long overdue for us to go across to the euro. Why should we stick with the pound just for sentemental value. Surely Britain is much more than pound coins, we should move to the most stable currency when possible and that would be the euro for us. Ovbiously this very moment would not be good as no currency is really stable atm. If i am horrible mistaken feel free to correct me.