No political event, today, can outshine the birth of the Euro. Hugo Young, writing today in The Guardian, pragmatically acknowledges that the event will help to shape the European institutional framework, and must now be accepted as a given. And the Treasury, whatever its reservations, diligently provides the world with all the necessary information The Treasury
I am, perhaps more deeply that many of my contemporaries, a European. As a Welshman by family and by birth, I am an outsider to English society, sharing many of the perceptions of the French, Germans and Italians. I am fluent in French and German, and gained by Cambridge place to study Modern Languages. I had to started to train for a Brussels legal career, when in 1963 De Gaulle vetoed Britain’s EEC entry, and scuppered my plans. I have always had a keen sense of my European-ness. I do not feel myself to be a citizen of the world, but certainly a citizen of Europe. Our “common European home” is a phrase which has resonance for me.
So today is an important day. It is not
that the Euro will change European economies, for better or for worse. It is not that the Euro will act as a drag upon European national economies that might otherwise grow. Nor would the Euro drag down the UK economy, if we were to join. All these predictions assume that currencies are more important that they are, and that nation-states can still “manage” their economies by the manipulation of their currencies, interest-rates and exchange-rates.
Yet none of that is true any longer. The launch of the Euro, although much-hyped by the media today, is an event of little consequence. Don’t mistake me - I applaud it, for its political significance: it will communicate the reality of European integration much more effectively than a thousand speeches, ten thousand documentaries. I welcome it, because it will dish the bankers and the bureaux de changes of Europe, adding to the pleasure and convenience of travel. It will have a limited economic impact, by improving citizens’ access to a much larger practical market-place, particularly with Internet access.
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But it will not change the course of economic history. Nor will it result in any great loss of control, for any of the twelve member-governments engaged today. And the reason? The truth is that currency management itself is no longer a process of any consequence. Eddie George and his Bank of England crew are assiduously navigating an iceflow towards the Equator, melting as it goes. Alan Greenspan’s manipulation of the American Federal interest rates has had no perceptible impact, this year, on the strength of the Dollar. Nowadays, global money markets determine these things.
Ostensibly, Gordon Brown in 1997 “gave away” to the Bank of England, the power to fix UK interest-rates. But that transfer was an empty gesture, a sleight-of-hand for which the Chancellor has reaped prolific political rewards. For the power of the nation-state to control its own interest-rates had by 1997 already evaporated, before the transfer was made. It was a hospital pass, signifying that the Bank of England was already an institution in decline, like the Continental central bankers. With the rapid integration of the world economy, the price of money (i.e. interest rates) is determined by international market forces, not by “central Banks” or any arm of Government.
So I salute the Euro, but it’s no big deal. Like the Financial Times, I do not accord the event any great economic significance. And its political significance is limited to popular education. The relative success of the UK economy, and the sluggishness of the leading Continental economies, is explained by other structural factors which currently favour us (but that’s for another day).
Check out The Times' account.
With all best wishes for 2002
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Diary Note 010102-01