Britain should join the euro

This article was published in the London Evening Standard
Never mind the politics, it's time to join the euro
7th September 2009
Back from summer holidays and the anxious wait for the Visa and MasterCard statements begins.
Europe, from rainy Ireland to sun-soaked Greece, has suddenly become frighteningly expensive, as the massive devaluation of the pound against the euro hits home. The jug of sangria, the pottery and wines to bring home now cost us so much more.
The saddest sights in south-west France and on the Spanish Mediterranean costas are British citizens handing back to estate agents the keys of the houses they bought but can no longer afford to keep, as their pounds from back home don't cover the bills.
For more than a decade we have been told that the euro was a terrible idea, while the good old pound sterling would protect the British economy from the wily ways of the Europeans.
Now more and more people are asking why the pound is letting us down - and whether treating it as a shibboleth that cannot be questioned makes sense any more.
All the old arguments against the euro have fallen away. There is no European super-state emerging with its adoption. There is no dictation of economic policy from Brussels.
The EU takes just one per cent of Europe's gross national income to spend on policies agreed by 27 cantankerous, ever-arguing member states.
The other 99 per cent of what European nations earn, make, save, tax and spend stays under national control.
Meanwhile, devaluing the pound was meant to improve exports - but trade figures show Britain's trade balance with euro-zone countries has worsened as the pound slumped.
Each European country is suffering from the agony of the world recession in its own way. The low-tax tiger of Ireland or the housing-bubble Spaniards have been hit.
So have the export-obsessed Germans. But the worst hit major European economy - Britain - is the one outside the euro-zone.
The Left's dislike of the euro was based on the notion that the Maastricht criteria would limit the state's ability to borrow and spend.
Yet France and Italy - and indeed most in the Euro-zone - are ignoring the Maastricht rules as they increase public debt to stave off further business closures.
President Sarkozy is proposing un grand emprunt - a giant loan - to increase French public debt as his way of combating the crisis.
Worse, as we plan for recovery, Britain is hobbled by its hostility to the euro. Take the fate of the City.
It is vital to our economy, and the UK financial sector, warts and all, adds massive value to the EU as a whole.
But our contempt for the euro means that no one listens when Britain protests about regulation from Brussels aimed at weakening the finance sector.
Sending Boris Johnson to plead for the City in Brussels last week was like sending a devout atheist to the Vatican to ask the Pope to change his line on birth control.
All that Europe knows about Boris or David Cameron is that they have spent their entire political lives rubbishing the euro and pouring scorn on the EU.
Labour does little better. In 1997 there were perfectly good technical economic reasons to explain why the pound should not dissolve into the about-to-be-born euro as did the Deutschmark, the French franc and the rest.
But Gordon Brown's famous five economic tests were always a red herring as the sixth test was, and remains, the certainty that the British would say No to the euro in a referendum - unless the case was properly made to them.
That is still the situation today. The kite flown by Peter Mandelson in June about us aiming to join the euro was quickly shot down. But in the end, Britons prefer reality to prejudice. The pound no longer walks tall against the euro.
The euro is not going to collapse because of wide variations in the economic profile of different regions using it any more than the US dollar fails because its external value and the interest rates set by the Fed do not suit Michigan and California at one and same time.
There are other ways of managing such imbalances. If low interest rates heat up housing, then banks could simply require a 10 per cent deposit before issuing mortgages.
Outside the euro, Britain will never be in the driving seat of Europe. We need to be. If the euro were used here as it is without fuss in countries we are close to, including Ireland and the Netherlands, then the next Governor of the European Central Bank could easily be a Brit.
To be sure, British entry into the euro is not even at the starting gate of current political debate. Tony Blair showed some early enthusiasm.
But relentless anti-Euro briefing from Labour's Treasury team after 1997 poisoned the well of rational discussion: it became near impossible to make a case for the merits of a stronger engagement in Europe.
Ministers just gave up making any positive case for the single currency or EU partnership.
It will need forces from outside the political laager to raise again the question of joining the euro.
The leader of one of our top business organisations told me recently that he listened to CEOs pleading for a level playing field in Europe, and for Britain to have more weight when EU financial regulations drawn up by the European Central Bank and the euro-zone finance ministers are discussed.
"I say to them they are making a case for the euro and immediately they blow up and start ranting about politics," he sighed.
For in the end, joining the euro is about politics. Labour forfeited the chance to make the argument.
And history tells us that the party that takes the boldest pro-European moves - that took Britain into Europe, and then agreed the single market sharing of sovereignty and the Maastricht Treaty - is the Conservative Party.
Today, with William Hague, Daniel Hannan and 99 in 100 Tory MPs firmly Eurosceptic, the idea that the Tories might again be a pro-Europe party seems further away than ever.
But if British voters are no longer going to feel like poor relations whenever they holiday in other European countries, then before long someone is going to have to begin making the case that like shillings and pence, the pound may now have had its day.