Economists – so why did we not join the Euro again?

Prompted by the ski pass topic and a few home and work related purchases from Europe this week, it got me thinking about the Euro again and how much better off we would be as individuals on face value if we'd actually joined back in the day when the Sterling to Euro exchange rate was much better (for us).

I'm sure there is a lot more to it on a national economy scale that most of us probably can't comprehend but I'm still surprised that there has not been more recriminations about not having joined in the past year as the value of the pound in our pockets has plummeted when we cross the channel. Maybe it's because the tories were anti it in the first place and New Labour didn't have the balls to let it pass Brown's "tests" so its in neither of their interests to make a song and dance about it now. But even those vocal advocates for the Euro a few years ago aren't crowing about how right they were.

So – what am I missing – with hindsight would it not have been a good thing to join?

If we'd been in the Euro last year we'd be defaulting in 2010. The Bank of England was able to cut rates to suit our own circumstances not those of Germany and France which didnt go into recession. Makes our exports (such as they are) cheap, should help us out of the slump.

Ask the Irish or the Greeks how they are enjoying being in the Euro right now. Doesnt make going on holiday to the Eurozone or Switzerland much fun but there you are…..

I am certain we should have joined – not only would we have been in a better position but the Euro would have been stronger had we joined.

Why didn't we? Cowardice and macho posturing from our politicians and fear of Murdoch

I am certain we should have joined – not only would we have been in a better position but the Euro would have been stronger had we joined.

Everyone wants a weak currency. Just ask the Chinese.

Gordo bottled it.

Why didn't we go in?
Tory political dogma IMO

Although – I'm glad we didn't right now

Economists – so why did we not join the Euro again?(

But the short answer is there was no prospect of getting it past a referendum, so they binned the idea.

As others have alluded to, not being in the Euro has effectively allowed us to devalue which helped us stay in a recession for a shorter time. Our exports are better value and imports are punitatively expensive keeping more money in the economy and therefore preserving more jobs. That's the theory anyway. As has also been said, Spain, Ireland and Greece are really being hampered by being in the Euro now as devaluation would be a solution to their problem. Likewise the low interest rates historically stoked the their booms. This is because interest rate management takes into account all the countries in the EU and the dominant countries, France and Germany, needed low rates to stimulate their economies as they had low inflation, low growth and high unemployment.

I didn't answer the question, we would probably have been worse off because we would have had lower interest rates in the past giving rise to a bigger boom and a bigger bust like Ireland.

TJ, yes, those of us still in work could have gone on holliday, but as mcboo points out, the country would have been bancrupted, so we wouldnt be eanting any euro's anyway.

IMO we should join once we've bounce back, the weak pound makes industry in general more attractive here, so either one of two things will happen. Inflation will push our wages up 50% inside 5 years, but the pound stays flat agiainst the dollar and euro and were back where we started with hollidays/bike parts being cheep abroad. Or we'll stick with *ankers and their bonuses, confidence will come back into the pound, and we'll be back at the same place we were 2 years ago.

the only people who want a strong currency is ex-pats and tourists going abroad, everyone else loves it.

But as with the british bikes example, the concept of free money balances things out. Weak currency means we dont import, no importing means no sterling abroad, no sterling abroad means higher demand for it, higher demand pushes rates up. High rates encourage imports. All because if ever there was a disparity between a currencies value/worth and its cost there would be free money/cash on the table/cash one the floor.

from a purely selfish point of view, right now i'm glad we don't have the euro-dollar.

the pound has dropped in value, which i'm hoping will cause some nice inflation as prices rise to reflect this.

i have a fixed rate mortgage; inflation is my friend, my mortgage doesn't change so my annual inflation-compensating pay rise is slowly increasing my disposable income. eventually i'll be able to pay off my mortgage with the change from a packet of crisps.

yay for inflation!

…..and the downside to a weak currency is inflation. Imports (especially commodities, fuel) become very expensive. Over time this pushes rates back up and in theory things should find a balance. Thats what the textbooks say anyway.

The Euro has benefits for doing business on the continent for sure. Businessmen backed entry fopr very good reason. The last couple of years have been a wake up call though to the extent that it is completely off the agenda everywhere except STW. Even people like Will Hutton have had second thoughts.

Thanks all – I'm feeling a lot more informed.

One has to wonder though – we look at the Euro as it is now with its French/German bias and rate setting and perceive it as not working in a way that would have favored us. But if we had been in it would it have been different? We are still a relatively big fish in a European sized pool – we are no Ireland (10X the population and GDP) and would have had more influence over rate setting.

Certainly a bit but rates would always have been lower than those set for us alone. Current rates are not perceived as perfect for France or Germany now either. The big benefit in the old tory days would have been to have independent rate setting but we now have that. The best thing Gordon Brown did.

possibly, but we're still smaller than germany/france, and there's two of them.

I remember having a conversation years back with a coleague, he thought it would be a better idea to fix the £ against the dollar (at $2:£1). Our buiness with Europe would fluctuate as it does now. So in Boom years we'd have done the same buiness we did, in the recession £ wouldn't have devalued quite so far, but arguably we'd have just looked elswhere for export markets (africa, S.america, Asia etc) and Europe would still be there in the good years.