Three Monkeys Online

A Curious, Alternative Magazine

The Euro – Friend or Foe?

– In terms of expressing a European identity, and the success of the Euro, the main bone of contention remains the U.K – they haven't joined the EuroZone (yet?) Will they join, and if so when?

(Emphatically) They will be a member within five years.

You're certain?


Would it be fair to say they can't afford to stay out?

I think it's becoming increasingly costly. To stay out. It really depends on how they manage it. For example, the one danger to the scenario is a referendum. I believe that if there was a referendum tomorrow, partly because of the Iraqi war, which has exacerbated U.K and European tension, it would be rejected by the British people, probably by a 70% majority. It's very interesting when you look at the countries, many of the European countries didn't have a referendum, and of those that did, such as France, the results were very close. Ireland rejected through a referendum certain ammendments, so we shouldn't take this evolving concept of Europe for granted.

Will Britian join? Yes I think Britain will join. There has to be some substance to what Tony Blair said about Britain being in the heart of Europe. Although that's been a problem with Britain for so long. It's tried to ride two horses at the same time. The so-called special relationship with the United States on the one hand and a perennial distrust of continental Europe that it's very hard for anyone other than a British citizen to comprehend. But it's there and it's deep rooted.

If there's political leadesrhip, if there's an informed debate, if Europe can be seen to get its act together in terms of a defence force, in terms of a European Constitution, and also when the financial benefits become more apparent, having a single european currency and a single European market of which Briain is a member simply makes sense.

The &ldquoNo to the Euro” Campaign in England, suggests that Unemployment within the Euro Zone is almost double that of the U.K, and that it's precisely because Euro countries have lost control of their own individual economies. Is that a fair comment?

I would respect their right to make it, but I don't think it's a correct argument for this reason. There are two elements – monetary and fiscal policy. If the Euro or Dollar interest rate changes, I remember a comment from the former British Euro commisioner Leon Britten who made the point – Britain may have an extra half an hour in order to adjust it's interest rates, not much more than that. You've got an interdependent Global monetary system. Monetary policy and interest rates are transmitted instantly across. So it's not true to say really that Britain has an independent monetary policy. It doesn't. On the other hand, if you look at its fiscal policy it's true to say that whether it's a federation or a continent or a country, if a country is running a consistent fiscal deficit, that the markets will punish that country economically and that leaves the supply side of the economy. Britain's growth rate in the last 10-12 years doesn't suggest that it has the magic formula for low inflation and high growth. Indeed its growth rate has been below that of the Euro Zone on a number of occasions. It's worth remembering, though I wouldn't want to be too chauvinist here, that at one stage a few years ago Ireland had an inflation rate of 3% and a real growth rate of 10%.

The other argument is that by joining the Euro Zone, the U.K will take on financial burdens from other countries – for example in respect to the current pension reform going on in Italy. How true is that?

I think it's very true. Although there are transfers for Britain as well. But you have to see the transfers in the context of a much more dynamic European economy. In terms of much lower transaction costs, in terms of the benefits to the British financial services industry, of participating in the European financial market, so yes there are costs but you've touched a fundamental issue there. Europe's population is aging significantly and people are living significantly longer. And in the next 10 to 15 years or so, there will be a fiscal crisis that will hit the European economy in the small of the back like an express train, and unless the Institutions begin to address that at a pan-European level very quickly, it's like an unexploded land-mine ready to go off. We know it's there but nobody's doing anything about it.

And I don't think, incidentally that Britain can isolate itself from that, because there will be fall out in terms of European and World Growth. The whole demographic time bomb. The whole adjustment now, to define benefits and contributions –they're only band aid. We have a big big problem at a European level. And it has to be addressed at a European level. And countries can't unilaterally stay behind some kind of little fence and pretend it's not happening. It will impact on all countries.

We constantly talk about Britain joining the Euro. Is there another possibility in terms of a country leaving the Euro?

I don't think so. The Franco-German breaching of the stability pact was quite wrong, but very fortuitous, and it forced both the Commission and Europe to address the problem of how to accommodate low inflation with growth. In doing that, it helped resolve future problems that might arise because a country simply couldn't live within the guidelines that were imposed upon us by participation in the Euro. I think we're going to see greater flexibility now, so it's unlikely that any country would contemplate leaving the Euro zone. It's a very unlikely scenario.

Will there be any major developments during the Irish Presidency?

One thing I think that will happen is the Council of Ministers will agree formally to ratify what has already happened de facto in terms of the stability and growth pact. That's one big outcome. I would hope the second outcome would be a pretty strong decision by the Council of Ministers to do much much more for developing countries. There is a danger as European identity begins to develop and grow from the single currency base to become more and more focused on Europe and to ignore for the time being the problems that there are in developing countries. I would like to see Ireland putting forward a proposal from Europe as a whole to deal once and for all with the debt problems of developing countries. When you look at the cost of the recent collapse of the Bear Market in the late 1990's and early 2000's, when you look at the wealth that was destroyed, when you look at the cost of the collapses that happened – writing off something like 3 ½ billion , it's not just a goodwill gesture, it's a moral imperative. And if Europe were to do that I think it would be a very satisfactory outcome for the Irish Presidency. I think the third thing for the presidency is that it will have to lay down some ground rules for the process of integration in terms of the migration across Europe, in terms of the portability of benefits and so on and so forth. We can't be a fortress Europe, we must be an open Europe.

Giancarlo Corsetti’s Euro homepage -excellent source of information on the Euro

European Union’s official Euro page

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