Will Hutton argues that Britain ought to join the euro. Now, it is clear that sterling is falling and that, as a result, imports will become more expensive and inflation may rise. This doesn't, though, to my mind mean that we should necessarily hitch ourselves to a stronger currency. The euro is strong because the eurozone has low inflation and because lots of investors now seem to prefer the euro to holding the dollar or pound. But, a strong currency means exports become more expensive. Britain already has a big trade gap. Switching to a currency like the euro would probably make our exports even more expensive - thus worsening our trade deficit.
Also, the ECB has a very hawkish line on inflation. That is why their interest rates are higher than ours. If we are slipping into a recession - as we are - then the last thing we want is to move to a system with higher interest rates. The ECB is constitiutionally mandated by the Maastricht and other treaties to persue price stability - not growth or employment. Thus, shifting to the euro could make a recession worse.
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