Bank 'will have to follow euro policy'
Sunday 01 February 1998
Yves-Thibault de Silguy is to deliver a lecture to the London International Financial Futures and Options Exchange (Liffe) on Thursday. Although the Finance Commissioner will not urge the UK to join the single currency immediately, he hopes to warn it of the pitfalls of delaying too long. Mr de Silguy argues that once the other EU countries enter into monetary union, the European Central Bank - the institution that will take over monetary policy for the "euro-zone" - will have a dominant influence in all 15 EU countries, including those that do not adopt the euro in the first wave next year.
In an interview with the Independent on Sunday, Mr de Silguy said this "will certainly affect monetary conditions in the UK without the UK being able to participate in decision making."
The idea is that financial markets will see Britain as a kind of "satellite" state of the countries in the euro-zone, because so much UK trade - around 60 per cent - is carried out in the EU. If the Bank of England wants to keep sterling stable to ensure smooth trade flows, it will be obliged to follow the interest-rate movements of the ECB.
Mr de Silguy dismissed the suggestion that the Bank might want to encourage divergencies in its currency to increase exports to the continent. "The UK is a well run economy that doesn't go in for competitive devaluations of its currency which would decrease the overall wealth of the country," he said.
The majority of EU countries, including France and Germany, are planning to adopt the euro on 1 January 1999. The British Government has said it will not join the single currency until after the next general election, which could be as late as May 2002. The Prime Minister, Tony Blair, has not ruled out holding a referendum on joining the single currency before then, although it seems most likely he will take the issue to the electorate after the election.
"I think attitudes (in Britain) will become more favourable very quickly once the euro becomes a reality. From that point on, the disadvantages of not being in the euro will quickly become apparent," Mr de Silguy said.
The Gaullist commissioner will also warn that non-EU companies wanting to invest in Europe will avoid the UK because it is not a member of the single currency.
In addition, British companies will be at a competitive disadvantage to their continental rivals because they will face an exchange rate when trading with the continent.
The EU heads of state are due to agree on 2 May which countries have met the Maastricht criteria on inflation, debt levels, budget deficit as a proportion of gross domestic product, and exchange rates - therefore enabling them to adopt the euro. Greece is the only country unlikely to be accepted. Denmark, Sweden and the UK have all decided not to join in the first round.
Around 70 per cent of Liffe's transactions are currently carried out in currencies that are likely to convert to the euro. "From 1 January 1999, most of the City's work will be done in euros, even if the UK is not in the single currency. The City will be the big trading place for the euro," Mr de Silguy said.
Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
Shock poll shows voters believe Ukip is to the left of the Tories
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
New era of cheap oil 'will destroy green revolution'
Ukip founder Alan Sked and Nigel Farage 'begged Enoch Powell to stand as a candidate'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
iJobs Money & Business
£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...
£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...
$125 - $175 per annum: Carlton Senior Appointments: Senior Wealth Manager In...
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...