Time to reopen the euro debate

Ten years ago when 11 European countries agreed to freeze their exchange rates in preparation for a single currency, a number of sceptical economic correspondents predicted financial calamity. Then, when the euro was going through a difficult teething process, they were quick to deride it as a 'toilet currency'. That within ten years of its creation, the same economists are now anticipating that the euro will overtake the US dollar as the world's principle reserve currency, demonstrates the economic strength and stability created by the euro.

So, when will Britain (Europe's second largest economy) become a member? This question has, quite simply, dropped off the political radar in recent years, but EMU's 10th anniversary is surely no better a time to re-open the argument and question whether by staying out Britain is missing out. It is difficult to accurately estimate the damage to inward investment and job losses caused by our non-entry. However, companies ranging from US construction giants Caterpillar to car companies Toyota and Nissan have made it clear they will not increase or even maintain their investment in the UK while we intend to stay outside the single currency.

Steady inflation rates of a fraction over 2%, the lowest interest rates in a generation, the creation of 16 million new jobs in the eurozone, increase intra-area trade and a deeper, more integrated financial market are just some of the achievements that serve as a testament to the euro's success. The euro's transformation is no better illustrated than by the observation that, whereas in 2001 it accounted for 27% of the global financial pie, compared with 51% for the dollar, it now accounts for 45% of the global market compared to the dollar's 37%.

The next step for the single currency will be for world commodity prices to be fixed in euros rather than dollars, a development that would also strengthen the arguments for UK membership. At present, manufacturers in Britain and, indeed, the eurozone are hostages to fluctuations in the US economy that have nothing to do with our suppliers or our own economy. Having world commodity prices fixed in euros would transfer the US's current economic advantage to Europe.

That being said, European monetary union remains unfinished business in more ways than one, and it would be disingenuous to claim that monetary union has been a painless process. Several countries sweated under the initial strain of having interest rates set jointly through the European Central Bank. Moreover, with currency devaluation no longer a quick fix for their finance ministries, Spain and Italy (and no doubt others in the future) have to face up more quickly to structural adjustments to maintain the competitiveness of their respective economies.

But the case for monetary union is still strong. Indeed, as ex-German Chancellor Helmut Schmidt put it, "who ever heard of a single market with 11 currencies", an argument that is pertinent now as it was back in the 1980s when he made it. With that in mind, lets re-open the argument in Britain.