The euro question...

The publication of the government’s Euro ‘changeover’ plan at the beginning of March has changed the terms of the debate about whether the UK should enter the Euro. This plan sets out a timetable for preparation, the schedule for a referendum, and the timescale for subsequent entry if the referendum results in a ‘Yes’ vote.

If we are serious about considering Britain’s future, all this is necessary. It is plain that the UK ignores what is now happening at its peril The Euro is now a reality in eleven of the fifteen EU member states. Those who wanted to look the other way claimed the organisations to bring the launch about would never be completed in time. It was. Then they said the launch would be chaos. It wasn’t. And all the signs are that the new single currency is beginning to work. This means that London, Europe’s largest financial centre is officially ‘outside’, but in practice it has already made the changes necessary to do much of its business in Euros.

The change has been advocated in Europe for the simple reason that the single market - where we can trade across Europe with no tariff or customs barriers - is seriously hampered if everybody is changing currency with each other all the time, and if fluctuations in value of currencies mean that an order has a different cost when delivered than when first agreed. It is estimated that 3% of Europe’s domestic product went on transactions of this kind. Margaret Thatcher signed up for the single market in 1985. We have been trading through it, along with our EU partners since 1992, but with the disadvantage of a fluctuating currency: half in and half out.

Britain now has a currency area one eighth the size of the Euro zone - so we can expect some turbulence as ‘hot’ money flows in and out of the Euro, as it can with our half-in, half out status. Interest rates may have to rise to high levels if the flows continue over the long term. This is the last thing we need as a country if we are to make further progress in building long term stable economic prosperity. These are not abstract thoughts as far as Southampton is concerned. As a key trading, service and manufacturing city in a prime location for links with Europe, whether we thrive in the single market or not has a vital impact on local jobs and prosperity.

In short, any clear headed look at where we stand as a country today suggests that we should think very seriously about joining the Euro sooner rather than later. Of course, the economic conditions need to be right. If our interest rates suddenly had to crash to join, or we entered at the wrong rate of exchange, we would be doing ourselves no favours. Labours Chancellor, Gordon Brown has set out five tests of the UKs economic interest, which will need to be passed if a recommendation is made to join and is put to the people in the form of a referendum. These include stern judgements on the impact on financial services, the effect on employment and the ability of the UK economy to react flexibly to events.

I strongly believe Britain should enter the Euro if those conditions are right. Of course, as the debate progresses we will be offered all sorts of scares to distract us from the central issues-: we will be told we will lose our sovereignty, as if we are currently nothing to do with any European agreements and the idea of a common currency has suddenly arrived from no-where. The truth is that is some areas, (mostly to our advantage) we have pooled some sovereignty long ago: but we will continue, just as we do now to take almost all the decisions that matter about the UKs future in the UK. To claim otherwise is nonsense. And of course, the opponents of entry to the single currency must put forward their alternative: we cannot continue forever to remain half in and half out as we are now. The logic of opposition has to be that we withdraw from the single market, re-erect tariff and trading barriers, and go it alone. Almost every competent economic commentator agrees that this would be a disastrous and economically ruinous course for the UK.

We need to think carefully about the UKs best interests. I believe they lie with entry to the Euro. I will be urging a ‘yes’ vote, when the referendum on this crucial issue takes place.

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