[Index] [About] [Participants] [Forum] [Vote] [Letters] [Disclaimer] [Archive]
Tracking The Euro
Euro notes and coins will be launched next year on 1st January 2002. More recently five European newspapers produced a poll showing that 52% of 6,000 eurozone respondents felt unhappy about the single currency. This compares to just over a third a year ago. A recent Eurobarometer poll also shows that opposition to the euro remains highest in the UK. Many businesses within the eurozone are also unprepared for the changeover, in spite of a long and concerted awareness campaign by the European Commission and national governments.
A Euro Rebuke
The Irish and Britain’s Chancellor of the Exchequer Gordon Brown found themselves rebuked at a meeting of European finance Minister on 12th February 2001. Most of the consternation was reserved for Ireland. Unlike Britain, Ireland is a member of the eurozone. Surprisingly, with Gordon Brown trying hard not to add fuel to the anti-euro campaign back in the UK, Ireland was left to defend itself. Yet a Britain within the eurozone would face just as much strife as Ireland in the same situation.
British sceptics gleefully welcomed the move by Europe’s finance ministers, which could have led Ireland being fined under the terms of the Stability Pact, in accordance with the Maastricht Treaty. They saw an opportunity. Britain’s anti-euro camp were keen to point out that joining the single currency could allow Brussels and not Westminster to make decisions over British economic policy. EcoFin’s actions followed the British and Irish governments’ wish to cut taxes, increase public borrowing and public spending.
An Inflationary Warning
Europe’s other finance ministers were expressing concern that the Irish and British policies could provoke price instability and inflation. The Irish prime minister Bertie Ahern, however, fought back because he needs to fulfil his own pledges to the Irish trade unions. Headlines in Britain read, “Hands off my budget!” and “Brown Tells off EU.” BBC News Online's political correspondent Nick Assinder argues that such headlines don’t resemble what really happened in the meeting.
Eurosceptic pointed their fingers at the European Commission. Mr. Assinder, whose article appears to support Britain’s membership of the euro, claimed that sceptics’ arguments are misaligned. He said: “It is ministers and prime ministers - not Brussels bureaucrats - who make the rules that govern the EU. That is exactly how John Major won his famous Maastricht opt outs.” In his article “Brown talks tough,” He argued that it was right for Ireland to be punished as a member of the euro club.
Club Members Must Abide
Indeed Luxembourg’s prime minister, Jean-Claude Juncker, emphasised this point. He said: “In a monetary union, everyone has to play by the rules. Ireland is evidently not doing so.” Ireland’s finance minister Charlie McCreevy fought back stating that Irish policy follows the European Union’s “broad economic policy guidelines.” He also made assurances that no changes are to be made. Meanwhile, France was told to accelerate its budget deficit cuts, and Italy was also ordered to cut its own.
The European Commission as a result of reprimanding the Irish government, asked for a IR£400m (£325.2m) budget cut. Even though the Irish economy is the fastest growing of all the EU’s economies, it is feared that Ireland’s already high inflation rate – the second highest within the E.U – could provoke a further increase. British eurosceptics claimed that this is exactly why Britain should stay out of the single currency.
Handing Over Control
Membership of the euro entails handing over control of interest rates to the EU, and the adoption of a unitary rate. This eurosceptics argue, looking at Ireland’s situation as a prime example, would not necessarily be the right rate for the British economy. As a result, leaving tax increases as the only economic lever, it could bring increased inflationary pressure and a possible meltdown of the economy.
BBC News Online revealed that Ireland isn’t alone though. The International Monetary Fund (IMF) also pushed the EU to accept increased spending and to relax its fiscal policies. The eurozone’s finance ministers rejected this proposal. The IMF’s comment echoed the Irish government’s concerns over possible knock-on effects caused by the slowdown in the United States’ economy.
Eurozone Confidence
The IMF argued that its recommendation could help to boost the global economy. Belgium's finance minister Didier Reynders, outlined EcoFin’s confidence. He said the EU’s finance ministers are "realistically optimistic” about the “eurozone's reasonable capacity to resist a US or a more general slowdown.” According to BBC News Online such confidence derives from the fact that, for the first time in decades, the European economy is stepping ahead of the United States.
At the same meeting Gordon Brown produced his annual report on the state of the UK’s economy. He put forward his arguments that Britain now fulfils all of the criteria for joining the euro. Mr. Brown also sought evidence over the single currency’s long-term performance. He made particular reference to its effects on unemployment and the finance industry in the City of London.
Labour’s Euro Uphill Struggle
Ultimately it isn’t European finance ministers that Mr. Brown must convince. Trade and Industry Secretary Stephen Byers admitted to Sunday Business, only a few days later, that the British government has an uphill struggle to win support at home for the euro. He told the paper: “It is a great irony that in terms of convincing the British people to join the single currency, one of the problems we will have is the success of our economy at the present time.”
He also admitted that Britain is unlikely to lose present or future inward investment by staying outside the eurozone. Mr. Byers believes that the excellent state of the UK’s economy, now the fourth largest in the world, will provoke cynicism towards joining the single currency. Yet in contrast, when the Anglo-Dutch consortium Corus made 6,000 workers redundant in Britain, he claimed that Britain needs to join to benefit from “currency stability.” The relatively high value of sterling against the euro was arguably said to have forced the company’s actions.
[About
EuroPolls]
[Index] [Participants] [EMU Forum]
[EMU Vote] [Letters] [Legal Disclaimer] [Archive]