Sunday, January 18, 2009


Will Hutton: (my emphasis)
"...there is a budget deficit next year of £118bn, which may have to increase again - with another big Obama-style fiscal stimulus - if the recession deepens. My view is that the financial markets will accept actual spending only if Britain pre-announces that after financial stabilisation has worked, it intends to join the euro - otherwise we will find ourselves in the same position as Iceland.

These are the grimmest economic circumstances since the 1930s. Lives and businesses are being wrecked as I write. There will be little appetite for my proposed measures; how much better to hope that we can muddle through, looking for "green shoots" of recovery and doing little radical.

But after last week the government - and the opposition - have to get serious. Britain is on the edge."


Tom Freeman said...

Wishful thinking on Will's part, I reckon. It takes at two years of convergence to qualify for joining the euro, not to mention all the time for negotiations and parliamentary wrangling. There's no way the government could win a referendum in that time, and if they signed up without having one, they'd hand Cameron a majority next year to dwarf Blair's ones, and then he'd undo the signing-up. And of course Brown is dead against it anyway. It just won't happen.

Well, either it's wishful thinking or Will knows all the above and therefore thinks we're doomed...

Paulie said...

Really? In the event of a threatened bankrupcy, would the same convergence rules be applied? Would the Eurozone not be prepared to adopt emergency bail-out conditions that were advantageous to us?

In the event of such a catastrophe, a referendum would be irrelevant, surely? In the event of such a catasptrophe, I suspect that short-term political gain would become just as irrelevant.

I've always believed that we would go into the Euro at some point in the medium term and that it would happen without a referendum, mainly because - in my superstitious non-economist head, I suspect that globalisation = everyone using reserve currencies (but I suspect a proper economist would laugh at me for saying this...)

Anthony said...

I think the most likely scenario is that if we have a currency collapse, we beg to enter the Euro and the ECB plays the Charles de Gaulle card and says "Get stuffed, you had your chance".

And then we learn our lesson, ignore the xenophobic shrieking and participate fully in Europe (if only).

Tom Freeman said...

"In the event of a threatened bankrupcy, would the same convergence rules be applied? Would the Eurozone not be prepared to adopt emergency bail-out conditions that were advantageous to us?" (my emphasis)

I agree with Anthony: under those circumstances they'd not want us.

Also, the only way to ease the rules would be for all EU governments to agree a treaty amendment, and then all the countries to ratify it - with a referendum in Ireland and anywhere else that fancied one. Which would be even slower than the normal route.

I think the only politically plausible scenario for signing up is in the first year or two of a popular Labour (or Lib-Lab) government, succeeding a deeply detested Tory one that had ruined the economy.

So a while yet...

Anthony Z said...

There is also the Nixon in China possibility that euro-entry becomes so pressing that the Tories in the early years of a new Government have no alternative, and their past record of opposition on the issue convinces people to vote yes in a referendum.

If you think this is unlikely, remember what you would have said to 3/4 of RBS being state-owned even six months ago.

mikeovswinton said...

Anhtony Z may be correct Paulie. Isn't that why we see the return of your fellow Nottinghamian - or is he a Bridgforian?- Forest fan and jazzer?