Magazine article Management Today

Given a Fair Wind That Single Currency Will Do No Harm

Magazine article Management Today

Given a Fair Wind That Single Currency Will Do No Harm

Article excerpt

The Government is like a celibate reviewing a sex manual,

Mention European monetary union and a single European currency and most people's eyes glaze over. It will never happen, they believe, or it is such a long-term proposition that it can safely be forgotten about for now.

Time, however, is marching on. The December 9-10 meeting of European Community leaders in Maastricht, Holland, should rubber-stamp the changes in the treaty of Rome needed to bring about European monetary union (Emu). By 1997, on the present timetable, Europe will have embarked on the final stage of Emu, in which individual national currencies are replaced by (probably) the European currency unit (Ecu) and sovereignty in monetary policy is handed over to a new European central bank.

Do not let all these Emus and Ecus confuse you. These are big issues. Before the end of this century, in other words well within the planning horizon of many companies, the pound could be no more and the Bank of England merely a regional office (surely not the head office) of the European central bank. In Britain, of course, Emu and the single currency are political hot potatoes. The Government's position, thanks to the sensitivity of the Tory party on this issue, has frankly been ridiculous. John Major and Norman Lamont have negotiated with European on the details of the mechanism under which a single currency could be adopted, without declaring their position on whether they think such a goal is desirable. The Government's position during the inter-governmental conference on Emu has been akin to that of a celibate advising on the contents of a sex manual.

This stand-off cannot continue indefinitely. Over the next few years a British Government will have to decide whether it wants to be part of Emu and the single currency. This is not a matter for a free vote in Parliament or for a national referendum. It would be better, and braver for the British Government, of either party, to declare its position at an early stage.

Businessmen appear to be clear on their position. According to the Confederation of British Industry, a single currency is desirable for three principal reasons. It would save businesses [Pound] 300 million a year in foreign currency heading costs. It would reduce sharply transactions costs, saving the equivalent of 0. …

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