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| The Great Britain the Murdoch press yearn for |
a) Right wing
b) Completely economically illiterate
c) Economical with the truth
Let us consider a few of the propositions they put before us
1. That Greece would be in better economic shape if it hadn't joined the Euro. What basis they have for making such a claim is sketchy at the very minimum. The crisis in Greece is caused by an unmanageable fiscal deficit, caused by decades of fiscal mismanagement. The reason that the Greek economy has hit the buffers is because of a global credit crisis, that is affecting every developed economy, not just Greece. If the Greeks were not in the Euro and not backed by the ECB, they would be in even more dire financial trouble. Whilst UK pundits who know nothing of economics or the Greek economy suggest that they would be better leaving the Euro. This ignores the fact that without the backing of the ECB, the Greeks would be totally unable to get credit with their basket case economy. This would mean that they would be unable to afford to buy imported goods and the citizens of the country's savings would become worthless. This is the scenario that lead to the rise of Nazism in Germany. It is no coincidence that extreme parties in Greece have had a massive upsurge in support. Imagine how much worse that could have been.
2. That the UK economy is in better shape because we are not in the Euro. The problem with this proposition is that we cannot possibly know. There have been periods when the UK economy has outperformed the Eurozone, but there have also been periods when it hasn't. If not being in the Euro was the answer to all of our economic woes, why are we in recession? The benefits of Euro membership are never put before us. Lets consider a couple of these. Our main trading partners are in Europe. When a major deal is done between two parties for instance Airbus and Rolls Royce, the value of the deal has to be priced in either Pounds or Euros. If the deal is over five years, both parties have to take a view on which currency would be safer. Just suppose Rolls Royce decide to price in Euro's and the Euro appreciates against the Pound. Airbus work in Euro's so they have no issue. For Rolls Royce, they get a nice healthy windfall because they get more money when they convert the Euro's. Great you may say. But what if the Pound goes up. All of a sudden, the deal ceases to be one which earns them what they were expecting. To get around this Rolls Royce will "hedge" the deal. In effect they take insurance out against the Pound appreciating. This adds costs to their product which a European company wouldn't have. If you are talking multi Billion Euro deals, these costs are significant. If the £ appreciates 5% against the Euro, for us going to Spain for a holiday, this seems insignificant. On a multi billion engine contract it is a huge risk and the costs of mitigating it reduce the competetiveness of Rolls Royce against competition. You may also want to consider the case of an Chinese Technology company are wishing to set up a European operation. They want to set up a base where they can expand across Europe and develop business contacts. London has many good selling points as a location for the office. The problem is that the UK has a population of 58 million, Europe has six times that. An office in London will have all the issues of currency that the Chinese company already has. Profit/loss forcasts have to be built to withstand the fact that the main markets for the operation use a different currency. Does this improve the competetiveness of a UK office? Of course not.
3. The Euro is a dodgy currency. The markets never lie. Just check how many pounds the Euro will buy you today compared with when it was launched. Despite all the market turbulence, the Euro is still viewed as a better bet than the pound. Of course there are problems, billions have been pumped into failing economies, but none of this has improved the view of the pound in the eyes of the world.
The UK would be stupid to join the Euro at this time. There clearly are major upheavals in the currency taking place. Only a fool would ignore these. What we must not do is fall for all of this stupidity which is spouted by the right wing press about the "failure" of a currency which has been far more successful than the one we currently have. The nonsense that "we would be uncompetive" if we were in the euro is nonsense. For most of the major companies operating in the UK, in effect they already are. They have Euro accounts where money is kept offshore to act as a hedge for these deals. Many UK banks also offer corporate Euro accounts (as they do dollar accounts). Not that you'd read any of this in the right wing press any time soon.
Interesting. So why is it that people I know in Austria, Germany and Slovenia who were in favour when it was introduced to their countries are now regretting that such a thing ever happened? They have seen prices more than double in a short space of time, and the value of their savings reduced,just as we did with the decimal currency swindle in 1971.
ReplyDeleteAnd there appears to be more than just circumstantial evidence that the Greek government lied their way into the Euro at the outset.
Morris,
ReplyDeleteThey assume prices wouldn't have doubled without the Euro. Maybe they'd have gone up more, without the fiscal discipline. I'm not saying that the Euro is perfect and I haven't advocated joining. What I have said is that the right wing press misinform the British public about the benefits. As such they are not likely to make an informed choice. I happen to believe that when we are discussing important economic issues that will have a huge effect on our country, the press should have a responsibility to present all of the issues, not just the ones which suit them.
As with all opponents of the Euro (and I am assuming you are an opponent), you are not addressing the issues I raised. I've laid out sound economic reasons and your counter argument is that a bloke you know in Slovenia doesn't like it. If you could demonstrate that the pound is better for British companies, with economic arguments then that would be fine. If you were to say "I just don't like it on principle and am prepared to accept the damage to our business as a result" that is also fine.
The difficulty for me is that opponents will not address the benefits. I agree that Greece shouldn't have been admitted to the club, as they did not meet the criteria to join. It is a disgrace that the books were cooked. That does not mean that the Euro is wrong. In fact only the UK and Lichenstein fully met the criteria. Had we been members, Gordon Brown wouldn't have been allowed the fiscal irresponsibility that fuelled the credit crunch. That is another argument that is never raised by the anti Euro brigade. Unlike other European countries we would have followed the rules and our economy today would be in better shape for it.
From my perspective in Ireland, any scrapping of the Euro damages my savings. I most certainly would not look forward to any recreation of the Irish Pound and the only alternative to the Euro that I would be in any way happy with would be for the Republic to relink with Sterling at an acceptable exchange rate, in other words, not bloody likely. A small country can't run a hard currency of its own. Just because the British right wing gets its jollies at the idea that the rest of us should be in abject poverty doesn't mean it should or will be so.
ReplyDeleteRog
ReplyDeleteYou have set out what you have not said - and you have suggested that I said something about "some bloke in Slovenia" that I did not say.
I object personally to the apparent supremacy of Germany - a country that lost the war and was then bailed out by the international brigade.