'Should the UK join the Euro?' poll discussion

moniker_2

eurocon wrote: »

On a recent visit to mainland Greece one thing I really noticed was the use of the euro currency when compared to the UK currency.

I have no doubt that should we enter the euro we will see at least a 10% to 20% increase in the cost of living.

Only if you continue to use Sterling after the UK has joined the euro.

moniker_2

bigheadxx wrote: »

The £ means something around the world and is still a peg for many other currencies.

The £ does not longer mean anything around the world (aside from being an annoying, small currency) and no, it is no longer a reserve currency and it is not a peg for other currencies except for Gibraltar. You can't use Sterling outside the UK anymore, except for exchanging it to other currencies at inferior exchange rates.

[Deleted User]

bigheadxx wrote: »

So you earned about £40,000 in 2007 and you earn about £40,000 here in 2009. Most people dont leave the "shrunken house" so the initial consequence of devaluation is far less than a cut in income.

I think we are starting to go around in circles here. And I note that you say "initial consequence". I was rather thinking about long-term consequences.

The Irish beef scenario goes some way to prove that the price of imports is not certain to rise as globalisation has opened up markets abroad and the UK economy, despite its woes, is more able to take a hit although this is partly due to the smaller manufacturing base that we have now as opposed to the 1970s.

One might also say that it also proves that the Irish economy is able to adapt and "take a hit" despite being unable to devalue its currency. But seriously, make up your mind. Will prices rise or won't they? You can't have it both ways.

British ex-pats know the risk when retiring abroad and this is something that they should take into account.

That's a somewhat blas! attitude! A 30% drop in the value of the Pound, to below the level it was even on Black Wednesday, was a foreseeable risk that they should have taken into account? That's not only heartless, but ridiculous.

If we lock into the Euro at todays rate then they are that much poorer for ever.

On the other hand, if the value of the Pound is set to fall still further, then they're going to be even poorer than they are now. And if we had joined five years ago, they wouldn't be as poor as they are now.

If we lock in at an anticipated higher rate then that surely demonstrates that a short term devaluation, for the UK, is the right option.

I do not follow the logic of that statement. How does it demonstrate that? And what anticipated higher rate? Have you seen the same forecasts I have?

http://news.icm.ac.uk/business/uk-interest-rates-likely-to-stay-low-until-2014/4072/

If you had put your pound sterling into a Euro account in 2007 then surely you would have lost out due to the change in the rate of exchange?

You have it backwards. If I'd transferred, say, £2,000 into a Euro account in 2007, that would have been around €2,800. Which is worth around £2,550 now.

I too am sure that prices will rise in the future but I dont believe that this will be entirely down to the exchange rate as I expect higher prices worldwide. However the pound in your pocket still buys you what it did 12 months ago.

I would consider that to be somewhat questionable. It depends on what you're buying; we're already seeing a situation where for instance French cheese is being priced out of the market because it's now more expensive than British counterparts. So the average price of cheese, as a rudimentary example, has gone up. That might put pressure on French farmers to cut their costs - but it'll also give British farmers and incentive to put their prices up. (Or it would, at least, if not for the supermarket cartel.)

I would say that the decline of the pound has been evident since WW1 but we have to factor in our unique situation in the early 1900s and how that was affected by bearing the cost of both world wars. The pound was always going to be under pressure as other economies flourished.

We're more than sixty years from WWII now; that's not much of an excuse anymore.

The UKs future energy needs are a concern however we have the Langeland pipeline in place from Norway. It is also anticipated that liquid gas, imported from Qatar is a future option. The Qatar currency is pegged to the dollar (US) which is under as much pressure as the pound so the fact that we are not in the Euro is unlikely to affect these supplies although a steep fluctuation in the currency could help or hinder us depending which way it goes.

Sadly, however, our currency has also fallen against the Norwegian Kroner and the US Dollar, making imports from both Norway and Qatar more expensive (though the dollar has lost some ground in 2009). And the long-term future of the dollar itself as an oil currency remains somewhat unclear, but that's a whole complex story on its own.

All European central banks were supposed to set their rates to maintain exchange rates within the set bands and to buy and sell foreign currency as necessary.

There's a limit to which that can operate in practice when those same central banks are also required to meet other (and occasionally conflicting) imperatives. The system as it existed at the time hinged, in practice, on the health of the Bundesbank and the German economy, which had a particularly difficult (and unique) set of circumstances to deal with post-1990.

As the ERM was the the second stage of EMU then the fact that a "single currency" didnt work in theory would be a case for it not working in practice rather than charging ahead with the Euro simply because rates had been stable for a few years.

The ERM allowed for revaluations - there had been 11 such revaluations prior to 1987. That the British Government went into the ERM at too high a rate and subsequently failed to make use of that particular function of the mechanism is not necessarily a fault of the mechanism.

The stability of the £ / Euro exchange rate on the back of a relatively benign economic backdrop is no real surprise.

True.

With a greater proportion of our economy reliant on the financial service industry than any other EU country then the effect of a "credit cruch" and banking crisis is going to be felt in the UK much more than any other EU country.

That's one of those systemic defects to which I was referring. We have way too many of our eggs in that one basket.

I dont really see how adopting the Euro would help us. Even in this troubled time for sterling the UK is still one of the largest direct investors abroad and also the recipient of more direct investment than any other European country.

That in itself might be some cause for concern, given that at least some of that direct investment takes the form of non-UK firms buying large chunks of UK firms - which have suddenly become a lot cheaper to buy. I'm not entirely sure that's good for the long-term future of the UK economy. Not only do we take an effective pay cut (oh, not by as much as 25%, I'll grant), and screw our savers and pensioners (especially those living elsewhere in the EU) in the process... we also have a fire sale on UK companies. I'm really not seeing much of an up-side here. All this ideological nonsense about controlling our own economy does us a fat lot of good if we don't actually own it.

We have had shopping tourist before going from the UK to France and a mini internet shopping boom when the £ bought $2, although not on this scale. However the current situation directly benefits a UK region, odd given that the Euro was supposed to offer stability and protection to smaller members.

It does so in the sense that the Irish are not susceptible to direct attack from speculators in the way that so many European currencies were in 1992/3. Given that it is non-contiguous with the rest of the Eurozone, and shares a land border with a non-Eurozone country, the kind of direct protection one gets from market stability with one's neighbours would only apply if the UK were also a member.

Again Irelands problem.

That's as maybe, but it didn't really answer my question. Would Ireland would be in a better shape if the UK were also in the Eurozone? It's not really an argument for the UK joining the Eurozone, though it might say something about one's ideological antipathy towards it if one were not prepared to concede even that!

£1 is currently worth the equivalent of 1.20 Irish punts, historically high, ...

It's the other way around. €1 = IEP 0.787564 = GBP 0.911092088. One British pound is therefore worth (0.787564 ÷ 0.911092088) = 86.441756 Irish pence, as was. That's a historically low figure. That's worse than it was on Black Wednesday. And the link I gave above suggests that it's only going to get even worse.

... nothing to do with the economic situation in Ireland as this small country bears the brunt of the crisis, unable to set its own interest rates. The politically impossible but most sensible step for Ireland would be for it to join the £ as the UK is its most important trading partner. It would currently be benefiting from low interest rates, higher exports, no cross border shopping, no squeezing of profit margins on exports to the UK and a greater influence on fiscal policy in its own country.

Ireland decides its own fiscal policy as it is...? (Notwithstanding the SGP, though since both France and Germany broke the SGP rules, I'm not so sure that they'd be enforceable in the case of Ireland.) As for low interest rates, ECB interest rates are at 1%, which can hardly be described as anything other than low. I'm somewhat sceptical that Ireland would be in any better health even if it could set its own interest rates. About all it could do even if it controlled its own monetary policy is what the BoE is doing - keep interest rates the same and print money.

To an extent though I would agree that Ireland's situation makes its Euro membership more of a political decision than an economic one (at least, given the UK's non-entry into the Euro); Ireland is geographically separated from the rest of the Eurozone by a large non-Euro economy on which it depends for a great deal of its external trade (44%, if memory serves). So any economic shock that disproportionately affects the UK will have knock-on effects in Ireland. In all honesty I think that's an anomaly that's specific to Ireland's situation and not reflective of the Eurozone in general. By contrast, we're in the converse situation: the majority (or at least the plurality) of our external trade is with the Eurozone.

But will its people be able to save if they dont have a wage?

Who said anything about them not having a wage? There may be layoffs, but that's a short-term setback and devaluation hasn't exactly prevented layoffs here in the UK. The value of their existing savings is protected - which was the point.

Wouldnt those savers now be better off switching to sterling accounts?

I think it would be rash to assume that the pound will appreciate in value going forward.

Are we not cutting costs and prices in the UK?

I don't know. Are we? The indicators don't appear to point in that direction; our CPI inflation is positive whereas the Eurozone's is negative.

Are prices not going to rise in Ireland the same as they inevitably will in the UK?

Are they? I fail to see how that follows. Why would prices to go up when prices for the same goods cost significantly less across the border?

All that said, as I said I do not actually advocate joining the Euro at present. Apart from anything else, this is its first real test as a currency area, and it will be interesting to see how it copes with the current crisis.

alf0001

Hi, Has anybody had Martin Lewis' stance on this topic?

RogerBruton

M_Thomson wrote: »

Are you British? If so, I worry that you would be allowed a vote in a referendum after making a statement like that.

A lot more British than many others who will vote; and I have lived in enough foreign parts to have a better perspective than many of those who will vote.

M_Thomson

RogerBruton wrote: »

A lot more British than many others who will vote; and I have lived in enough foreign parts to have a better perspective than many of those who will vote.

You're missing my point. To say that we should just take the Euro and call them Pounds shows that you have put no thought whatsoever into the matter.

zygurat789

eurocon wrote: »

I have no doubt that should we enter the euro we will see at least a 10% to 20% increase in the cost of living.

This could be cheaper than the billions quantitavie easing is costing to achieve the same effect

[Deleted User]

zygurat789 wrote: »

This could be cheaper than the billions quantitavie easing is costing to achieve the same effect

I wonder if we'd qualify for a bailout from the ECB?

moniker_2

alared wrote: »

The time for joining the euro was when we were getting €1.45 to the pound and not now when it is virtually one for one.

Although going by Brown`s disastrous gold selling escapade,he would think right now is a good time.

We will probably never again see the euro be €1.45 to the pound (but very likely see the Pound be £1.45 to the euro) due to Britain's mis-management of its public finances and its currency.

I trust the ECB far more than the BOE. Having the euro in the UK would be a good thing because it would impose strong limits on how much our politicians would be able to mis-manage our tax money. Politicians hate this just as much as children hate being told that they can't have a new toy and there is no doubt that this is one of the major reason why politicians are against switching over to the euro. The matter of "being in control of our currency" is in my opinion just a shadow argument to hide the real reasons.

teddyco

You see, I told you that joining the Euro would be a bad thing.

Anyone still want to join the Euro now? No, I didn't think so.