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DANIEL HANNAN, our Euro M.P. - THERE WILL NEVER BE A GOOD TIME TO JOIN THE EURO The slide in the pound has Euro-enthusiasts slavering with anticipation. “Calls for the euro are likely to reach fever pitch if there is a collapse in sterling,” writes Roland Rudd, chairman of a pro-euro lobby group, in the London Evening Standard. “Suddenly membership of the euro is beginning to look a very attractive escape route,” agrees Will Hutton in The Observer. Hang on, chaps: weren’t you arguing that we should join eighteen months ago, when the pound was more than 30 per cent more valuable than now? What if we had taken your advice then? The financial crisis in Britain could not have been cushioned by the exchange rate; it would instead have been felt in output and jobs. Rather than a 30 per cent reduction in sterling, we’d have suffered a 30 per cent reduction in wages, with a cycle of strikes and sackings as people struggled to adjust to the new reality. Happily, being outside the euro, we are able to respond to the shock with policies determined by our own needs. We have fiscal and monetary independence, and we are using both. The cheap pound means that Britain can now price itself into the market. It makes possible an export-led recovery. I know that the decline of sterling is painful for some of this bulletin’s overseas readers. It’s no picnic for me, either: I’m paid in sterling, and I work in Brussels and Strasbourg. But there is a reason why the pound is taking a pounding. Investors can see that Gordon Brown squandered our resources, leaving Britain with the worst deficit of any advanced economy. They know that he has committed more to the bail-out than any other country. It gives me no pleasure to say this, but the sterling crisis is a market comment on eleven-and-a-half years of Labour profligacy. The Broon, to borrow John Smith’s phrase after Black Wednesday, is “the devalued prime minister of a devalued government”. If the ERM taught us anything, it is that there is no such thing as a permanently correct exchange rate. After Black Wednesday (or, rather, White Wednesday), Europhiles toured the studios telling anyone who would listen that “we joined at the wrong rate”. But the idea that 3 DM to the pound was too high a rate is hard to reconcile with it having been too low a rate two years before; and, sure enough, we had reached that rate again within five years. The Hutton/Rudd arguments for joining the euro are terrifyingly similar to the arguments for joining the ERM. Then, as now, Europhiles claimed that membership would boost business. In fact, more than 100,000 firms went bankrupt during our 23 months inside the system. Then, as now, they promised that membership would create jobs. In fact, unemployment doubled to just under three million. Then, as now, they claimed that it would bring lower interest rates. But interest rates were in double figures for most of our time in the ERM – despite inflation at barely three per cent – and 1.75 million homes were overtaken by negative equity. Then, as now, they assured us that participation would bring stability. In the event, our trade-weighted exchange rate was less stable during membership than before or since. Is there any circumstance in which these zealots would not advocate euro membership? If the pound bounces back on the basis of a recovery, will they still be whistling the same old tune? How many times do they need to be proved wrong before we stop listening?
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