The UK and the Euro - publié le 05/03/2006

Résumé du document

In Maastricht in 1992, the then twelve members of the European Community decided to move towards an Economic and Monetary Union, with the aim of launching a single currency. But when the European single currency was launched in January 1999 by 11 of the 15 EU member states, Blair decided to exercise the opt-out negotiated by John Major. Maastricht set four criteria to be met in order to join the euro: the avoidance of excessive government deficits to be less than 3% of GDP for annual debt and 60% for the stock of government debt; inflation to be no more than 1.5% higher than the best three performing member states; currency to stay within the margins of the European Monetary System for at least two years ...

Extraits

[...] British people are also more likely to travel within the EU and would benefit from a single currency: in 1972, Britons made 3.7 million visits to other member states, by 1999, this figure has increased to nearly 40 million. A study by the Treasury also found that if Britain had joined the single currency, over 30 years its trade with the Euro area could be 50% higher than if it kept the pound. This in turn could push up growth rate by a a year over the same period. The British economy has also converged with those of the Continent. [...]

[...] The Mail, The Sun, The Telegraph and The Times are likely to campaign against. “Prepare and persuade” The government has been preparing for membership, through institutional and legislative action. In February 1999, it published the first part of its National Changeover Plan, which set three stages to Britain joining the Euro within three years of a yes vote. The government has also contributed financially to the development of a network of 24 Euro-Info Centres. In October 1999, the Britain in Europe campaign was launched by Blair, Brown, Cook, Kenneth Clarke and Charles Kennedy. [...]

[...] Soon after election, in 1997, the Chancellor, Gordon Brown, said that four of the five tests had not been met (only the fourth was met, about the impact of euro membership on the City of London) but that there were obvious economic benefits to joining. He said that the government should “prepare intensely” so that Britain could be in a position to sign up “early in the next Parliament”. On June of this year, he said exactly the same thing, except he did not give a date. [...]

[...] So why not join the Euro? Euro membership is a very controversial issue in Britain and has political implications: should Britain give up its monetary policy? In its 1997 manifesto, Labour argued in favour of Euro membership and committed itself to hold a referendum on Euro membership. Soon after election, the Chancellor stated that five economic tests should be passed before holding a referendum. The five tests are: Are business cycles and economic structures compatible so that the UK and others could live with euro interest rates on a permanent basis? [...]

[...] What would be the outcome? [Plan] The economic and political debate Arguments for membership Adoption of a single currency would mean a loss of sovereignty for Britain, since it would surrender the national capacity to set interest and exchange rates. Giving up the pound would also have symbolic implications. Moreover, a study of the Treasury found that if Britain had joined in 1997, excess demand would have pushed inflation to nearly and it would have stayed high. This would have made the economy less competitive. [...]