The plan to bounce us into the Euro gathers pace!

bazster

"The plan to bounce us into the Euro gathers pace!"

Good news for everyone except the Little Englanders.

gozomark

bazster wrote: »

"The plan to bounce us into the Euro gathers pace!"

Good news for everyone except the Little Englanders.

not all those who oppose joining the euro are little englanders - there are plenty of economic reasons to be wary - can eurozone ever converge economically ? If not, can one interest rate suit all countries ? I have my doubts whether eurozone will sufficiently converge economically, especially with the ever expanding eurozone bringing countries with much lower levels of GDP/head, and much lower levels of prices. If it does convere, countries like Poland will have higher inflation rates than say Germany as wages catch up, so Poland will have lower real interest rates than Germany - is that sensible ? Also, given the ECB inflation target is 2% or less, adding countries like Poland with higher than 2%, means Germany etc have to have lower than 2% to keep the average down.

The ideal size of a currency block politically is not the same as the ideal size for economic reasons.

Olipro

gozomark wrote: »

not all those who oppose joining the euro are little englanders - there are plenty of economic reasons to be wary - can eurozone ever converge economically ? If not, can one interest rate suit all countries ? I have my doubts whether eurozone will sufficiently converge economically, especially with the ever expanding eurozone bringing countries with much lower levels of GDP/head, and much lower levels of prices. If it does convere, countries like Poland will have higher inflation rates than say Germany as wages catch up, so Poland will have lower real interest rates than Germany - is that sensible ? Also, given the ECB inflation target is 2% or less, adding countries like Poland with higher than 2%, means Germany etc have to have lower than 2% to keep the average down.

The ideal size of a currency block politically is not the same as the ideal size for economic reasons.

well this is precisely why the ECB set conditions for countries to meet before they can join... they can't just lump in whenever they like.

There is of course always adjustment, but market forces dictate that prices must converge... you can't seriously expect the market to exist in a state of perpetual price arbitrage.

Olipro

richardlionheart wrote: »

Out of interest,
If we had joined the Euro in the first round back in 1999 ?

Would we now be in a better state fiance/banking wise at the moment.?
i mean would we of have to had adhered to more stringent euro FSA type rules?
or just been pretty much independant still and still of ended up here.?

For example the likes of say Northern rock would of been able to lend
to home buyers across the euro zone , would they have been under the similar
restraints of euro banks such as Santander ( where the max they could lend out in total was no more than 50% of its deposits ..need this varifing )

it just feels typical that now UK plc, is viewed with caution due to our enormous housing bubble, and it will have to be lanced before the good old pound
will be sound again.

as it looks now Holidays abroad for the Brits value wise appear
to be Goa , days of cheap holidays abroad are over ..for the time being

thanks for the interesting topic
Rich

I doubt it; at the end of the day, the Euro and the Pound is just currency, it's not going to have much influence on how people spend or invest, not to mention a lot of UK companies operate their main balance sheets in Euros; and it's really not a problem for a UK bank to make loans to EU homebuyers, they're more than able to hedge the risk in the fx market.

gozomark

Olipro wrote: »

well this is precisely why the ECB set conditions for countries to meet before they can join... they can't just lump in whenever they like.

There is of course always adjustment, but market forces dictate that prices must converge... you can't seriously expect the market to exist in a state of perpetual price arbitrage.

agree, but the concern is the length of the period of adjustment, and the pain experienced versus the eventual benefits. Is the eurozone too big and diverse to ever function as one market ? The US is close, but they have a common language, and much fewer barriers to movement of labour. Anyone who says never to the euro, or alternatively we must have the euro at any cost as its part of being in Europe, are equally pig headed. There probably will be a time it suits the UK to join the Euro - I really don't think its now

Count_Dante

gozomark wrote: »

not all those who oppose joining the euro are little englanders - there are plenty of economic reasons to be wary - can eurozone ever converge economically ? If not, can one interest rate suit all countries ? I have my doubts whether eurozone will sufficiently converge economically, especially with the ever expanding eurozone bringing countries with much lower levels of GDP/head, and much lower levels of prices. If it does convere, countries like Poland will have higher inflation rates than say Germany as wages catch up, so Poland will have lower real interest rates than Germany - is that sensible ? Also, given the ECB inflation target is 2% or less, adding countries like Poland with higher than 2%, means Germany etc have to have lower than 2% to keep the average down.

The ideal size of a currency block politically is not the same as the ideal size for economic reasons.

The USA has a common currency across all states, some of which will no doubt have higher inflation than others. They live with it. Some regions of Britain will have higher inflation than others (e.g London). Big deal.

If we follow your argument to it's logical conclusion, why doesn't every town in Britain have it's own currency? Because it would be a ridiculous waste of resources.

Milarky

If we ever had any doubts that 'ordinary British people' (y'know those ones in 'hard working famillies') were unlikely to be able to render a meaningful judgement on the question of (applying for, only..) Euro membership that boat has now well and truly sailed.

If you have to blame somebody for the current political paralysis (aka ''Don't mention the Euro!'') then blame John Major who, in his haste to buy off the discontent at his leadership struck a formally 'sceptical' tone by 'promising' a referendum on the question (if put!!) All the other parties then got 'frit' about it and matched that factuous (and disingenious) promise with their own ones.

Short term gain (Major survived till 1997) for long term pain - sensible people like Ken Clarke couldn't get elected when clearly the best candidate.

2001. Blair wanted to use Labour's honeymoon with the public to bring this to a conclusion and Broon sabotaged it with his meaningless 'five tests' fig leaf.

The problem is that we have been denied any proper debate and - in any case - it's the job of MPs (who used to be slightly mroe independent) to make the chose - not the people in (undeliverable) referendum.

bazster

If HMG announced one day that the pound/Euro exchange rate was to be fixed for evermore but that we'd keep the pound coins and notes then I doubt that all the tabloid-reading dopes-on-a-rope who want to "keep our pound" would even notice that we'd joined the Euro.

purch

The USA has a common currency across all states, some of which will no doubt have higher inflation than others. They live with it. Some regions of Britain will have higher inflation than others (e.g London). Big deal

In the U.S.A. much of the "strain" is taken up by the free movement of Labour across State lines. States such as Florida & Arizona have seen huge influx's of people over the last 10/15 years, which has helped some of the Northern States where Industry and Jobs have disapeared cope with the economic changes.

This of course can happen in Europe, but the all too obvious discontent this causes in the member states that have to accomodate these "migrants" makes this less likely to happen.

eeja

purch wrote: »

It has been the case over the last 40 years, Sterling has required an Interest rate premium over it's competitors, just to retain any semblance of stability.

Correct but could the simple reason be we are running and have been running a large deficit on our balance of trade for donkeys years ( leaving out of course those years we had a huge surplus of North Sea oil)