There is a scenario (the Californian Solution) in which Greece, having temporarily exited the eurozone, could devalue, using a kind of national soft-euro, to cope with its sovereign debt crisis and then, if it managed to go back to parity with the euro, it could rejoin it.
Angels are struck that this is roughly similar to where the UK is today. Having exited the ERM (though the Major administration never wished again to enter the eurozone), and having devalued heavily to cope with its Brown-perpetrated current crisis, it now is very close to parity with the euro, a status that is steadily maintained.
Is it planned by the Brown regime that it try again to join?
The five conditions set by Brown were always designed so that they could be ruled to be or not to be met, simply on the Saviour of the World's say so anyway. By joining the eurozone the UK would avoid further devaluations of the pound - good for inflation, but possibly bad for competitiveness should the economy continue to inflate.
However, in order for an application to succeed the UK would still be subject to the usual Maastricht conditions of fiscal convergence (debt/GDP ratio 60% maximum or at least falling towards it; deficit/GDP 3% maximum or falling towards it), monetary convergence (inflation rate no more than 1.5% higher than the three least inflationary EU members; interest rate no more than 2% higher than that of the same thee members), and two years membership of the ERM-II maintaining the pound exchange rate, in terms of the euro, within +/- 15% of an agreed basic rate.
Brown's diktat does not run outside our poor country; he must conform to these requirements even with all the pliability the European Union would display in the event of a UK application to join the eurozone. But fiscal convergence will be difficult to achieve for some time, (just as in Greece) in spite of Alistair Darling's intimation of a deflationary budget - if and when there is be one before the election -or if and when there is an election after which serious budget presenting must take place.
The Californian Solution is, nevertheless, apparently being maintained as an option. We can't go on like this, an election is essential to put such choices, central to our democracy, in our hands.
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2 comments:
Hasn't Mandelson hinted at entry, or so I read a day or two ago?
http://www.independent.co.uk/news/business/analysis-and-features/will-europes-star-currency-by-destroyed-by-tiny-greece-1898734.html
That's what Mandelson said last year, Rolf. Had the UK adopted the euro before the crisis, devaluation would not have been an option and there would have been even higher costs in terms of income and employment.
But HG is right: a proposal or, better, an application to join now would re-shuffle the election cards withoug New Labout having anything to lose.
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