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Lembit Opik


Thursday: Lembit Opik

Lembit Opik
Lembit Opik answers your questions
 

Lembit Opik says: The euro is not a nationality, a personal identity, or a statement of sovereignty. The euro is just a bit of metal you can carry round in your pocket to buy things with.

So what's the big deal about it? I'd say Britain is traditionally a bit cautious about change.

In this case, the fears relate to the possibility that the Euro will stop us from being as British, and that it will not be good for us economically.

Let's look at those for a minute. Firstly, Britishness is not about what the metal in our pockets is called. Sure, a Euro will look a bit different to a pound. But it does not herald the end of the Royal Family, or the double-decker bus, or Wales, England, Scotland, and Northern Ireland.

Distinct Identities

It doesn't mean the British pint will vanish either. Or that it will cost more. People in Newcastle upon Tyne don't feel any less Geordie because they share a currency with Londoners.

Scotland and Wales have very distinct identities, even though they share a currency with England. So Britain won't be less British if we share a currency with the French, Germans and Italians.

What the euro does mean is that we're in a single market, where our currency works across a region of 370 million people. When you travel, you won't lose a percentage to currency exchange.

And when you go round Europe, the euro will help you compare prices in a "like for like" way. Interest rates will come down as they're already lower in the rest of Europe, so your mortgage gets cheaper.

And it means jobs won't flow out of the UK into the Euro zone. Some say this isn't happening, but industry tells us it is - and the evidence is in the dole queues.

I'm not obsessed with the euro. But, on balance, for me the evidence favours the euro for Britain. It's good for the economy and individuals, and it means that Britain has a strong economic voice for our interests in a positive Europe. I hope you agree.

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BBC News Online business reporter Stefan Ambruster put some of your questions to Lembit Opik MP. Here are the transcribed highlights.

SA:

Brydon Gay, Shetland: Is the euro the first step towards countries in Europe losing their identity?

Lembit Opik:

It is a fair concern. I think that probably the answer that most of us could be comfortable with is that it doesn’t mean losing your identity. The reason we can be quite comfortable with that is that the evidence suggests that that doesn’t happen. Looking at the UK, you have got Scotland, Northern Ireland, Wales and England, all forming the one big kingdom and those four states are still quite clearly identified in the actual facts of devolution – Wales, Scotland and Northern Ireland have an even stronger identity than they had before and I think the same is true for Europe. Italy, France and Germany haven’t lost their identity, even though they work pretty closely together and I think the same is true is true in the euro zone and we wouldn’t lose our identities simply because we are sharing a currency.

SA:

But even in Britain we have a Scottish pound and we have the pound issued by the Bank of England. Denis Chuah, Malaysia: Would the Queen’s head on the euro help Britain to retain its identity?

Lembit Opik:

I confess to being something of a monarchist myself. I think it is good that we have got a Royal Family – I don’t see any harm in it. So speaking personally, I think that is a good idea. I would very much like to see the UK saying – yes we will enter the euro but we want to have a national branding on, say, one side of that coin. It is not logistically hard to do – it wouldn’t add to the cost of making the money and if it makes people feel that there is a national distinction without causing a major problem then that is all to the good. As you say, Scotland, Northern Ireland and indeed Wales have a differentiation of the currency but we are all in the single currency of the pound and the same surely is quite straightforward to be introduced across Europe as well, if we chose to do it.

SA:

One of the arguments put forward to promote the euro is that allows the people of Europe to compare prices across the different countries in the union. John Brown, Belgium: If people are able to compare prices surely they can do it without the euro, they won’t need any euro to do that, they can just convert the currencies themselves – so what benefit is there?

Lembit Opik:

I think he is right in the sense that if that was the only benefit it wouldn’t be enough on its own to justify a change to the single currency. But in effect there are two other much more important factors related to this. First of all, it seems that we would save a very large amount of money in exchange rates. At the moment when you change your money from the pound to the euro, you pay a percentage to the banks – that becomes profit for the banks and lost to the person who is changing the money. So financially you will make a saving if we were in a single currency. Secondly, we believe that if you take away the barrier of a different currency it would be harder to justify major differentials in price between say the UK and the rest of Europe. Bearing in mind that everything from shopping out to petrol, cigarettes and booze are more expensive in the UK compared to the Continent, there probably would be downward pressure on those prices.

SA:

You point out that the euro would make everything cheaper in terms of currency conversion and the personal savings is one of the issues that has been promoted – how much is this being promoted by business to save a transaction cost of dealing with France, Germany or any of the other euro zone countries?

Lembit Opik:

As someone who used to work in a multinational company myself, I know there is a very strong encouragement coming from those companies that trade on an international basis to eliminate the cost of the exchange rate. In a way they are actually doing that already – they are not waiting for the UK to make a decision – many companies now have a euro bank account and therefore they don’t enter the pound at all in their ledger, they just do their international trade in the euro, even though the UK is not yet using it. So the biggest winner would be individuals who are travelling because most individuals have not yet thought about having a separate euro account. There is nothing to stop people doing that of course but my guess is that if enough people realised how much they would save on travel and so forth, then they would be economically quite motivated to support the change.

SA:

One of the big concerns that has been highlighted is about the role of the European Central Bank. Eddy George brought that to the fore recently when he mentioned that one interest rate doesn’t necessarily fit. Steve Sargent, UK: What can Britain do if the European Central Bank imposes an interest rate on Europe that is not in Britain’s benefit?

Lembit Opik:

We would have to define what it means to be in Britain’s benefit. The reason I say that is because you could make exactly the same case for the United Kingdom. You could say that it would be helpful to have a different interest in say Newcastle upon Tyne than that to London because the north east economy operates at a slightly different cycle to London. But in reality, what tends to happen is that if you have a different interest rate in the same currency then all the investment will flow to the highest interest rate. So we do need to recognise or accept that one of the consequences of a single currency probably would mean having the same interest rate and that economic factors would be driven by other variables such as taxation and government investment. What I predict would happen is that our interest rates in the UK would come down quite substantially, because interest rates are lower on the mainland, but that we would still be able to influence our economic activity using those other tools.

SA:

Samantha Bridger, UK: One concern is that there will be an inevitable rise of inflation in Britain if we joined the euro. What policies would you propose to combat that?

Lembit Opik:

There would not necessarily be a rise in inflation, not least because many domestic products, ranging from household shopping to the price of a car, are lower on the Continent. So we might see a very favourable outcome with regard to inflation. Also the lower interest rates doesn’t necessarily mean higher inflation either. But one of the things we would need to watch would be if, as a result of entering the euro, the British economy went into some sort of a boom which it would be hard to sustain – that could lead to inflation – that is one reason I think we have to be careful not to enter the euro at too high a level. Secondly, we have to make sure that these so-called convergence criteria really are showing that we are converging to a soft landing into the euro zone. It is a fair concern but I think that probably in the short term the drive would be to reduce inflation.

SA:

What do you think of Gordon Brown’s version of the convergence criteria?

Lembit Opik:

I think Gordon Brown is a very clever man and at times I have thought he has played with words because of political concern about committing the Government to the euro. As such his actual convergence criteria - the things he really looks at do make sense. Sometimes they are wrapped up in politics and it is like he is pandering to euro-scepticism in the country. What I would like to see Gordon Brown, and indeed the Labour Government, doing is setting out more clearly that they do believe that we should be in euro, that they would campaign for a “Yes” vote in that euro and that they would do what they can to allay the concerns of the public in rather the same way that I am trying to do in this interview.

SA:

Based on the convergence criteria of the European Central Bank, do you think Britain qualifies?

Lembit Opik:

I think we do qualify but the one matter of caution is to make sure that we don’t enter the euro at too high a level. I think the one thing we have to avoid at all costs is any danger of us causing a boom which is much more likely than any kind of a bust by entering the euro. As I said previously, that is the only way I think that we would be likely to suffer undue inflation. But on balance, when the UK wants to enter, it is definitely within the parameters of how our economy is doing to do so quite comfortably without cheating the criteria.

SA:

Speaking of countries that are experiencing a boom, Paddy MacDonald wants to know if you think that the euro has been a good thing for the Irish economy?

Lembit Opik:

I think it has been a good thing for the Irish economy. There is no doubt that Ireland has been a tremendous success story in European terms. The European investment has led to a sustained and sustainable increase in the quality of life in Ireland. I think also as a result of that, Ireland has had far fewer problems entering the euro than some of the other countries such as the UK - they have seen the benefits already. I don’t think Ireland has anything to worry about on that. They were told off recently for some of their public spending but I think that the useful outcome of that exchange was the fact that the European Finance Ministers could not impose conditions on Ireland and Ireland was free to decide how it wanted to administer paybacks to the public.

SA:

At the ECOFIN meeting they couldn’t impose any restrictions because there is no framework there for them to do that yet but there has been talk of things like tax harmonisation which would start to establish a framework that would allow the European Union to take control over national fiscal policy. Is that a concern to you?

Lembit Opik:

Yes it is a concern. I would be opposed tax harmonisation. I don’t think it is appropriate and I am glad to say I don’t believe that tax harmonisation would be enforceable especially if the UK is at the table. What’s more dangerous is that if other countries decided that tax harmonisation was a benefit and the UK wasn’t at the table, then when we enter the euro, and we will have to do so sooner or later, then we may have to do it on someone else’s terms. My judgement there is we need to get in now to sit at the euro table and say we are not going to support tax harmonisation and we will do all we can to make sure that is still autonomy within the economies while we still work together in a single currency zone.

SA:

Is joining the NAFTA treaty anywhere in the realms of a possibility?

Lembit Opik:

It is not a serious proposition. I know some people who have been opposed to the euro have tried to suggest to the British public that we have much more in common and much to gain from entering the NAFTA regime than the European regime – the facts simply prove otherwise. Fifty nine per cent of Britain’s exports go into Europe and only 14 per cent go to the United States. So realistically it is not a starter. Either we enter the euro or we effectively sit as an island off the coast of Europe, looking distantly at our American friends who buy less than a quarter of what the Europeans do.

SA:

One of the consequences some people claim of staying outside the euro is that jobs go to Europe and you yourself have said that in the Referendum Street programme. What evidence is there that dole queues are becoming longer in Britain because we are staying outside the euro?

Lembit Opik:

The evidence comes from the industrialists themselves. There was speculation when Vauxhall talked about closing some of its plants in the UK – there was speculation that that was partly because of the strength of the pound and us not being in the euro. There was confirmation from the Corus steelworks that the strength of the pound was in that case losing 6,000 jobs. Most recently, in my constituency this week, 200 jobs have been lost in the automotive parts industry and once again the managing director has said to me that one of the reasons is because of the strength of the pound. The reason entering the euro would be in our interest in all three of those cases is because if we peg the pound at the right level then exchange rates will not make us uncompetitive. The crucial thing is we enter at the right level but once we are in then we can stay in and it takes away that very dangerous variable. I predict that things will keep getting worse and it will become obvious to everybody that unless we enter the euro at the right level we are going to be throwing away people’s jobs in the UK.

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