An Economic Analysis of a Troubled Relationship, Second Edition
Chapter 3: The cost of the euro
In this chapter we consider the costs of the euro for the UK (and the related issue of bail-out costs); this is a major cost of being in the EU since it is now mandatory for members of the EU to join the euro at some time. While the UK currently has an opt-out from the euro, this is inconsistent with the general objective for the EU of ‘ever-closer union’. Like our opt-out from the Social Chapter, which we were always under pressure to abandon in the interests of European unity and was abandoned by Labour after obtaining power in 1997, the euro opt-out is not envisaged by our EU partners as being viable in the long term. Past experience has shown that the way the EU evolves is something over which we have little control. So we assume here that if we stay in the EU we will eventually agree to join the euro. We begin with some discussion of how the introduction of the euro has derailed the EU project and led to endemic crisis. The euro, as we have seen, has therefore become costly for those in the EU who have so far joined it. We then go on to consider in detail how the UK’s interests are affected by joining the euro.
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