Wednesday, January 21, 2009

Nick Clegg: Join the euro to save the City and public finances

The Financial Times reports an interview with the Lib Dem leader:

Britain must prepare to ditch the pound and join the euro in order to salvage the public finances and prevent the “permanent decline” of the City, Nick Clegg, Liberal Democrat leader, said on Tuesday.

Predicting that debate over the euro could soon return with a vengeance, Mr Clegg argued that joining a “major reserve currency” would protect Britain from its “extremely dangerous” exposure to volatile global capital flows.

In an interview with the Financial Times, he said public opinion could “turn on its head” and swing against the pound as the “sheer brutality” of the crisis prompted the public to yearn for the stability offered by the eurozone.

In recent years Lib Dem support for the European project has had a distinct flavour of yearning for a better yesterday, which is the charge that was made against the SDP in the 1980s. So it is good to see Nick making a case for the euro that relates to today's headlines

My own preferred solution is for the euro to be made legal tender in Britain - I have seen shops in the more touristy areas of Scotland that already accept it - and to let the people decide that way.


Matthew Huntbach said...

If we were in the Euro, we would not be able to devalue our country to make it more competitive. Some of the weaker economies in the Euro are now wishing they weren't for this reason.

I've always been a fan of a low pound, because I think it encourages a self-reliance which we don't have. We need to turn down our dependency on imports, and a lower pound helps do that. But if we are going to do that, we also have to make sure we don't lose our capacity to be self-reliant by letting skills and knowledge disappear. This country has been dreadful at that. We've spent billions on useless weapons for "defence" but done so little to defend ourselves against the danger of being reliant on overseas sources of the basics which could so easily be cut off.

Anonymous said...

The problem is that Clegg is not expressing 'support for the European project'; he is merely looking for a port in a storm. If we let you into the eurozone now -- and that is by no means certain -- will you want to get out again in ten years' time when things have changed? My own view on this question is here:

Does Matthew Huntbach have any actual evidence to back up his unsupported assertion that some eurozone countries are regretting their membership? That is most certainly not the case of Spain, which would unquestionably have suffered terribly if we had still had the peseta.

dreamingspire said...

With financial engineering having something of a back seat for some years to come, the argument for sterling will I think be significantly weaker. We could be moving in the direction of 3 currency blocs: dollar, euro and far east. That leaves the gulf states to take on the mantle of playing the markets, which serves them right.

Frank Little said...

But will the ECB let us in now? See the Daily Telegraph report.