Better off out than in?

Martin Wolf asks whether this is an opportune moment to consider UK entry into the Euro Zone and finds the arguments for remaining outside are compelling.

I share his view, indeed for several years I have believed that the relative success of the independent Bank of England in maintaining control of inflation and keeping the economy growing has been the fundamental argument for staying out. The UK has chosen to operate with a fully flexible (floating) exchange rate and at the moment, the depreciation of sterling against the Euro is providing a very welcome competitive boost to an economy in dire need of re-balancing away from consumption and imports towards saving, exports and investment.

Two points drawn from Martin’s article

Floating currencies and inflation:

“The advantages of exchange-rate flexibility need not go with worse price stability. Between 1998 and 2008, consumer prices will have risen by just 18 per cent in the UK, the same amount as in Germany and below the 20 per cent rise in France and 26 per cent in Italy, according to the International Monetary Fund.”

Growth over the ten years of the Euro:

“There is no evidence that being outside the eurozone has imposed a performance penalty upon the UK economy. Between the first quarter of 1999 and the first quarter of 2008, its economy expanded by 28 per cent, against 21 per cent in the eurozone as a whole and 16 per cent in Germany.”

Read the remainder of Martin Wolf’s article here