Ready or not
Europes single currency
DISCUSSION of the European Unions plan to merge its currencies has taken place on two levels: the official and the bewildered. At the official level, all is clear: the euro is going to happen, just a few loose ends need tidying up. At the bewildered levelwhere Europes businessmen, commentators and comparatively few interested citizens have discussed the matterpeople have changed their minds. First they assumed that the single currency would somehow never happen, so no point worrying about whether it was a good idea. Now they assume that it is certain to happen, so its actually too late to worry about whether it is a good idea. And oh yes, add quite a few, it is bound to come apart in the end.
Thus prepared, Europe approaches the most momentous change in its constitutional and economic-policy arrangements since the creation of the common market in 1957.
From here to eternity
In an ideal world, or even one that hadnt gone quite round the twist, there would have been a proper debate about the Maastricht plan before the treaty was ever signed. Failing that, after it was signed, governments would have started getting their economies ready. They did not do that either. Their technical planning has been impressive, without doubt: a prodigious feat of design and logistics. But more basic preparations, no less important, have been left undone.
If the single currency is to succeed, Europes economies will have to withstand economic shocks, without recourse to local control of interest rates or currencies. This will call for great flexibility in national markets. Governments have done little to provide it. The lack of political preparation is even more serious. When recession strikes in the EU after 1999, many will blame the euro. The new regime will be challenged and will rebuff such attacks only if a stock of support for it has been built up. Again, no progress (see article).
Europes leaders reply that nothing would ever have been achieved if the EUs architects had been so timid. The EU model is: agree to it, bash on with it, and deal with the problems as they arise. Once the euro is here, goverments will liberalise their economies because they will have no choicebut if you insist on that first, everything stops. Europes voters, on the same view, are too dim to have the case for the euro put squarely before them; once the euro is here, the poor dears will learn to like it.
It would be difficult to deny that up to now this model has worked. The question is whether it is wise, never mind democratic, to apply it to an idea as bold and demanding as the euro. The answer is No. The danger that the European method will at last meet its match, with horrible consequences for the single market and much else, is real.
The fact that these arguments are correct is unlikely to stop the EMU train. The single currency seems almost certain to go ahead. But in Britain, at least, a real choice is still to be made. The Economist has argued many timesan argument that will not be rehearsed again herethat the case for a well-designed EMU is strong. Britain would face difficulties all its own in taking part (because of the sensitivity of its economy to changes in interest rates); but given popular support for a well-planned venture, Britain would be right to join in.
Unfortunately, this is not a well-planned EMU, which makes Britains calculation extremely difficult. If it joins, it runs a bigger risk than the others of finding the experience grim. If it stays out, it puts itself on Europes margins, possibly sacrificing both influence and investment. Apart from hoping that the issue just goes away, what can Britain do?
There are five possible courses:
Join at the outset on January 1st 1999.
Declare an intention to join as soon as circumstances permit, but not in the first group.
Say nothing and play for time.
Rule out membership at least for this parliament, or for the foreseeable future, but not thereafter.
Rule it out for ever.
Options one and five can be briskly dismissed. Britains economy is too far out of step with continental Europes to make early membership at all sensible, whatever the merits of joining later. And since a promise never to join would command no credibilitynever is too a long time in politicsit would serve no purpose except the juvenile one of telling Europe to get lost. The choices come down to the middle three, all variants of John Majors admirable wait and see.
In practice they may come to the same thing, despite the blood that will be shed over them in the coming months. An intention to join when circumstances permit is consistent with an intention to stay out at least until after the next election, depending on what one regards as permissible circumstances. Best then to say nothingas Mr Major tried to before his little electoral mishap? Not very leaderlike, that: and people, reasonably enough, do keep insisting that the prime minister tell them what he is thinking.
Our preference, mild as it is among these three, is to rule out joining in this parliament, but otherwise leave options open. If EMU succeeds after all, well and good: Britain can join later. If it fails, it was better never to have joined. The drawback of the more cautious variant is that it runs a bigger risk of losing Europes goodwill and/or deterring foreign investorsbut protestations of good faith would minimise this danger, and luckily these are Tony Blairs speciality. The advantage of leaning towards caution is that, given the significance of this change, a longer period of waiting, seeing and calm reflecting is better than a hurried one, with ministers being asked every five minutes, Do circumstances permit now? When do you think they will permit?.
On balance there is little to be lost, and perhaps a great deal to be gained, by standing quietly to one side as Europes innovators grapple with this thing they are creating. If it proves a marvellous successand heres hoping it doesit will still be there for Britain to join after 2001.
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