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Correspondent Tuesday, 3 June, 2003, 09:23 GMT 10:23 UK
Are we ready for the euro?
Evan's Euro Adventure
Evan Davis assesses the risks
Evan Davis

Chancellor Gordon Brown will announce on Monday whether Britain is ready to join the euro - one of the biggest economic decisions affecting daily life in the UK since the Battle of Hastings.

The BBC's economics editor Evan Davis explores the issues.

Have your say


The day is upon us. At last, the government has to come off the fence and announce the results of its five economic tests for euro entry.

It's the least well-kept secret in Whitehall that the Chancellor will say we have not passed the tests, and are not going to have a referendum right now.

The five euro tests
Economic convergence
Flexible economic system
Boost to UK investment
Impact on London's City
Employment and growth

But how many tests will we have passed? When will we look at them again? And is the government going to make any effort to ensure the tests are passed next time they are looked at?

There is plenty of suspense about the cabinet euro verdict on Monday. But the advance leaks and argument testify to the fact this is a particularly difficult decision. And I can see why. The issue are far from clear-cut.

Evan Davis
Evan Davis - it is all a balance of risks

For nearly three weeks, I travelled around four eurozone countries.

With the five tests in mind, I have tried to assemble evidence on both sides of the euro argument.

It would have been satisfying to return laden with a suitcase of arguments that all pointed in one direction.

But, I have to say, the arguments seem to me ambiguous.

Changing face of France

In Toulouse, southern France, you can see the main argument in favour of the euro is that it promotes a "single market".

Bakery sign
The French have shown a positive attitude to change
It makes cross-border trade and international investment easier, and, in turn, this promotes more competition and consumer choice.

It also makes it easier for large companies to locate business activities in the lowest cost locations without fear of exchange rate fluctuations disrupting cost calculations.

That single market is becoming a reality.

For example, one might have thought the French were the most fervently nationalistic consumers who would never give up their Renaults or Gauloise cigarettes.

But in Toulouse, you see France is changing. It feels cosmopolitan, and open.

Problems for Germany

Euro coins
National identity would be limited to one side of the coin
One can see the case against joining the single currency in Germany.

It is an economy stuck in a rut, with slow growth, high unemployment and consumers fearful of spending.

If we were in that position - and it is not so long since we were - we would cut interest rates. That would make borrowing cheaper, and encourage people to spend not save.

But does that happen in Germany? No.

In a single currency, there can only be one interest rate and as Germany is just a part of the eurozone, that rate is not the one that Germany needs.

Euro influence minimal

Of course, one can not entirely attribute the successes of the single market, or the problems of the single interest rate, to the euro itself.

European Central Bank - Frankfurt
European Central Bank - a Bank for England?

The UK is outside the currency, but one sees plenty of evidence of a British presence in the single market.

In Toulouse, our presence is obvious, from the wings of Airbus planes being assembled there, to the Virgin mega-store or Vodafone.

And do not blame the euro for the downturn in Germany.

The country has many problems - an inflexible labour market, an over-dependence on declining heavy industries and the burden of unification to name but three.

The euro did not cause Germany's difficulties, and getting rid of it would not cure them.

Calculated risks

But if there is anything that my euro tour underlined, it is that a decision on the euro is not about choosing one clear road or another.

It is about choosing one risk or another.

Do we risk staying out and being excluded from a developing single market? Or do we risk joining, and finding ourselves with the wrong economic policy?

Ultimately, a decision on the euro is really a decision about which risk we are more comfortable taking.

And as with any set of risks, our choices will depend not just on technical arguments or economics, but on our broad values, our gut instincts and our prejudices about just where our destiny lies.



Evan's euro adventure was broadcast on BBC Two on Sunday 8 June, 2003 at 1915 BST.


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In or out?

CLICKABLE GUIDES
 VOTE RESULTS
Should we join the euro?

Yes
 53.03% 

No
 46.97% 

1780 Votes Cast

These results are purely indicative and do not necessarily reflect public opinion

See also:

20 Feb 03 | Politics
20 Feb 03 | Politics
05 Dec 02 | Business
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