Britain and the euro: not for yesterday, not for today, not for ever ?
- Introduction: The United Kingdom, from EMS to EMU.
- To join or not to join: That is the question.
- Brief historical overview of the EMU.
- Basics of benefits and costs advocated for and against joining before 2002.
- The five tests' conditions then and now - The economists' point of view.
- An overview of Gordon Brown's 'five tests'.
- An economist's answer to the fifth test.
- The evolution of the UK's economy since then.
- The British political market.
- The case for the euro, a technocratic and political point of view.
- The weight of British political parties: Understanding British eurosceptism.
- The case for the pound, a widely spread and sovereignist point of view.
- Conclusion: From economics to politics.
The EMS's Exchange Rate Mechanism (ERM) has long been a source of political controversy, playing for instance a relevant part in the final drama of Margaret Thatcher's resignation as a serving Prime Minister. Britain entered the ERM in 1990 to exit from it in 1992 and afterward, the new Euro-politico-monetary controversy has been that of joining the future single European currency, the euro. In 1992, the Maastricht Treaty set the euro-agenda; in 1999, the euro was launched in its virtual form; and in 2002, the euro appeared in every euro-zone member's citizens' pockets as coins and notes. Joining the ERM was theoretically reversible but if Britain was to join the euro, it wouldn't be the case anymore: doing so would be violating the Rome Treaty and one can hardly imagine what unpredictable ramifications that would have. We will see in the first section what the general economical debates (I) are, I will give a brief historical overview of the EMU and expose the basic benefits and costs given before 2002. In the second section, I will give more focused economical arguments for and against entering the euro-zone regarding Gordon Brown's ?five tests? (II) and more or less try to sort out economical ambiguities in the research of an ?optimal currency area?.
[...] An overview of Gordon Brown's ?five tests? The government decided that economics would be crucial and Gordon Brown, Chancellor of the Exchequer, proposed ?five tests? of economic credibility that should be passed before he could recommend whether or not Britain should adopt the euro instead of the pound. Those five tests should be met ?clearly and unambiguously? but in principle, they would be distinct from any political decision to join that decision should be taken by referendum. One should obviously, before even considering the results of these tests, take a look at those five tests, at their reasons and at their pertinence. [...]
[...] One has to try to classify arguments in favor and against the euro for its beneficial and negative political consequences because these consequences exist and should not be forgotten. As Adam Smith put it in The Theory of moral sentiments (1759), man of system seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board But, in the great chessboard of human society, every single piece has a principle of motion of its own.? 1. [...]
[...] In the second section, I will give more focused economical arguments for and against entering the euro- zone regarding Gordon Brown's ?five tests? and more or less try to sort out economical ambiguities in the research of an ?optimal currency area?. After concluding that economic observations remain unclear and discussed, I will observe how political forces are pregnant in the United Kingdom (III) in this debate and in, more broadly, the debate about European integration. The driving force of the EMU has always been, on Continental Europe, political: the euro was supposed to propel all members into European integration at a faster pace. [...]