Setting the Euro trap...
THE PROPAGANDA BAIT...
M"Mortgage costs would tumble because interest rates in the Eurozone are lower"
M"A single currency would make price comparisons easier, forcing British companies to drop prices to match those of foreign competitors" (Mirror, 17.5.02)
M"All evidence shows that sharing a common currency means prices come down"
M"Risks [of not being in the Euro] deter investing in our country"
- Oona King MP, Britain In Europe (Wetherspoon News Jun/Jul 2002 [produced by the pub chain])
M"Isolation from the single currency makes us a less attractive investment location"
- Lord King, Britain In Europe (Mail, 11.7.02)
AND THE ANTIDOTE...
µ74% of consumers surveyed by European consumer group BEUC noticed price hikes on the back of introducing Euro notes & coins. French grocery prices rose 4%. (Mail, 30.5.02)
µFrench consumer group UFC noticed a 10% rise in weekly shopping bills alongside the changeover towards Euro notes & coins. This, along with the willingness of retailers to exploit shoppers' uncertainty was the "principal factor". Many retailers paid lip service to pledges not to increase prices between Nov 2001 and Mar 2001 by increasing them early! (Telegraph, 24.8.02)
µPrices vary up to 50% even inside the Eurozone (Sunday Telegraph, 20.1.02)
µSurveys in 1998 & 2001 showed UK mortgages to be cheaper than most in the Eurozone; Rep. Ireland & Spain, though slightly cheaper than us, had much tighter legal controls on lending (Sun, 28.5.98 & 'No' campaign, "UK mortgages and the Euro", 2002).
µThe Eurozone interest rate has to be set in the 'general interest', and would be unlikely to coincide with the needs of our economy, which are different. The wrong rate could destabilise our economy, & increase its liability to 'boom & bust'. Housing markets & the ability to pay for mortgages could suffer. ('No' pamphlet, also Prof. Minford, Telegraph, 12.9.01)
µUK inward investment in 2000 was up 36% on 1999 [the Euro's first year] (Sun, 12.7.01)
µ"Investors are not considering the Euro as a principal issue" - Invest UK (Financial Times, 22.1.02)
µThe drop in foreign projects coming to Britain in 2001 was due to the US downturn and not Euro related. Eurozone countries had less investment while non-Euro Sweden received more. - Accountants Ernst & Young's survey, (Times, 11.4.02)
µBritain's fall was "less than for many others" (Financial Times, 22.1.02)
µStaying out of the Euro has not had an impact on London - Anna Barlow, trade body London First (Sun, 13.3.02)
µLondon's money market LIFFE does three times more business than its European competitors, and its lead has increased since 1999. 62% of transactions use the Euro. -Hugh Freedberg, Chief Executive, LIFFE, in reply to letter on 'Euro exclusion' (Telegraph, 25.1.02)
µBritish businessmen who favour the Euro believe we must first devalue the Pound by at least 10% If Sterling were to join at the old ERM rate (DM2.95) interest rates would have to rise to 8-9%. An alternative would be 5p on standard Income Tax or a 20% cut in health & education spending. - Anatole Kaletsky, former Economics Editor (Times, 14.2.02; on the then-prevailing conditions)
EURO THREAT TO PENSIONS?
Some literature claims that Euro membership will make us liable for other EU countries' underfunded pensions. The only "authority" is a quote from retired Commissioner Jacques Delors. Although anti-Euro, the Economist (14.12.96) disputed a Commons committee's fears that in joining, Britain might have to bail-out the liabilities of a bankrupt EU member. It felt that we had the right to veto this.
Blair since signed up in principle for 'harmonisation of social systems' and gave the EU a means to suspend our veto. The Treaty of Nice gives more away. (See Treaties of Amsterdam, Nice; 'The Euro is a political project', IoD, 2002; Resistance, Nov 2000 Treaty supplement). It is our EU membership, not the Euro that provides the pension threat.
The Times (1.4.02) reported on new proposals from "EU countries without extensive funded pension systems" infuriating the pensions Industry. Alan Rubinstein of the National Association of Pension Funds despaired:" It is hard to understand why an effective & successful UK pensions model should be potentially destroyed".
EURO LINK TO TAXES?
German Finance Minister Eichel warned that the single currency will fall apart without a common tax system (Times, 23.12.01). Others point out that Euro membership limits the 'balance' between public spending and borrowing, which might affect tax levels?
Although much of their pamphlet. is sound, the 'No' campaign (slogan: Europe Yes, Euro No) claims Euro membership might cause VAT on housing, rises in stamp duty and Capital Gains Tax as well as the need to subsidise continental pensions (EU treaties do not support this!)
It is again our EU membership, not the Euro that provides the tax harmonisation threat.
PLOTTING THE COURSE...
Though signing up for an overt tax harmonisation Directive would be political suicide, the Government has already accepted the 'voluntary' EU Code of Practice. Gordon Brown has been stealthily increasing tax take towards EU levels.
Eurosceptic City adviser Andrew Smithers argued that Brown would have to raise tax levels to prepare Britain's economy for Euro entry (Evening Standard, 18.6.01)
Some would see tax rises as more acceptable if the money goes towards 'public services', but not all 'public spending' has been as voters want - e.g. £30m has been spent on Euro preparations (FT, 19.7.02).
July 2002's [Government] Spending Review hints that much has been earmarked for 'EU' military & other non-domestic use. (Other schemes might include ID cards, est. up to £3Bn, and reorganising government regionally, £2Bn).
BLUFF or DOUBLE-BLUFF?
Some see the sober Brown as a "good guy" compared with the vain Blair. He even "toughened" his "Five Tests" on joining the Euro - a judgement must be made by June 2003. His blessing for the Euro might be more credible than the PM's?
Some leading campaigners feel that Blair would not risk losing a referendum this side of the next General Election. He admits public trust is a problem. However Brown is reported to favour entry and believe the "Tests" will be passed (Sunday Telegraph, 19.5.02). NB Commentators have noticed that they are so vague and general that they can be "passed" or not, as convenient.
In January 2002, both Sweden and Denmark announced referendums on joining the Euro. Although some construe this as potentially putting Britain under pressure to join, the Swedish government has since cooled. In Britain, the ousting of arch-Europhile Sir Ken Jackson from the AEEU union has recently weakened the Euro camp.
However the European Commission plans to spend £173m of taxpayers' money on 'Europe-wide' propaganda in 'the four years from early 2003' (Telegraph, 1.7.02). The Foreign Policy Centre believes that the 'disunity' of the 'No' camp can be exploited (their "Winning the Euro Referendum" is worth reading as an exercise in propaganda).
Are they testing the temperature of the water? No need to panic - but we should not err on the side of being complacent either.
This page compiled: 1 September 2002