More on the current financial crisis

Further to my comments yesterday, there is another European dimension to the financial crisis.

Imagine that, instead of the euro, we still had the peseta, the lira, the Irish punt, French francs, etc. It is highly likely that they would have responded differently on exchange markets, and some might have been subject to speculative attack. Currency market turmoil would have added to the instability, aggravating the crisis. Instead, the bulk of Europe's common market was able to rely on a stable and strong currency to help weather the storm.

This point was made in connection with other crises too, by Stewart Fleming the former bureau chief at the Financial Times in the European Voice last week.

He wrote:

"So far, in the face of the worst global financial crisis since the 1930s, the euro is once again proving its worth as a bulwark of stability. In 1997 and 1998, during the Asian and Russian debt crises, in the run-up to the launch of the euro, the single currency helped to insulate 'old' Europe from global contagion. When the bursting of the dot-com bubble triggered a transatlantic slowdown in 2001-02, the single currency again helped the eurozone ride out the worst of the storm. Now, in the wake of the US' subprime crisis, the eurozone is (once again) coping with the turbulence far better that would have been the case if the nation states of the eurozone had still been clinging to their national currencies, which is testimony to the extraordinary credibility that the single currency and its guardians in Frankfurt have amassed."

Will Hutton, writing in today's Guardian, goes further and believes that joining the euro is the only way Britain can secure the future of its banks and economy.