In 2001 I published “Just Say No: 100 arguments against the Euro”. It is timely to revisit some of them, to see why the Euro is causing such trouble to economies like Ireland, Greece, Portugal and Spain.
I pointed out that the Euro was an “Exhange Rate Mechanism you could not get out of”. As so many countries had found it difficult to sustain their currency levels against the DM in the ERM, why did anyone think they could do so from within a single currency? It was locking the door and throwing the key away. That could prove painful if the building caught fire. The two central arguments were “You cannot make currencies behave in line unless you first bring the economies in line” and “History shows that rigged exchange rates do not work”. Economies would find it more painful to make the adjustments they needed to make against each other if the exchange rates no longer took most of the strain.
In the chapter on their failure to create a single economic policy that could work for the whole currency zone, I explained that there isn’t one interest rate that is right for Manchester and Marseilles, nor is there one exchange rate that is right for Lisbon and London. “You cannot have a single economic policy without a single budget”. “There will be endless disagreements about how much European government should spend and where.” “The poorer and richer regions are different. The poorer ones will lose out”. “There is no single political system to take decisions and explain them to electors”.
I forecast that there would be pressure to increase taxes, to “harmonise them” in an upwards direction.
The main analogy I used said that joining a single currency was like sharing a bank account with the neighbours. More people are now beginning to see the force of that comparison. The richer and more prudent neighbours are now being asked to subsidise the overdraft of the poorer or more spendthrift, because they do share a bank account at the European Central Bank.
Having helped keep the UK out of the Euro by arguing the case and setting out in detail the costs, risks and problems, I see no reason why the UK should now be expected to pick up some of the bills for the predictable stresses within the scheme. If you want a successful single currency first create a successful single country. The Euroland members do need more central economic management and control, but none of that should apply to the UK. The Euro has for a decade been a single currency in search of a country to love it. The Euro needs a country called Europe if it is to succeed. The Uk should not be part of that centralising venture.