Powerful signals that being outside the euro will hurt us

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The Independent Online

"The car in front is a Toyota", goes the advertising slogan. When it comes to the euro, it seems Toyota also like to be at the head of the pack. Yesterday's announcement that the company would require their UK suppliers to bill them in euros rather than sterling comes on the back of similar moves by BMW (who retain a significant manufacturing presence in Oxford to build the new Mini), and remarks last month by the head of Nissan UK about the danger to future investment posed by our dithering over joining the single European currency.

"The car in front is a Toyota", goes the advertising slogan. When it comes to the euro, it seems Toyota also like to be at the head of the pack. Yesterday's announcement that the company would require their UK suppliers to bill them in euros rather than sterling comes on the back of similar moves by BMW (who retain a significant manufacturing presence in Oxford to build the new Mini), and remarks last month by the head of Nissan UK about the danger to future investment posed by our dithering over joining the single European currency.

It is no accident that such developments are taking place first in such an internationally integrated, indeed globalised activity as the making of cars. But expect many more sectors to follow suit. We are in fact witnessing early but significant signs of the creeping "euro-isation" of the British economy. Like globalisation, it is a pretty much unstoppable process, and one that we would be better off accepting and trying to manage than dithering over. While the Government wants to "prepare and decide", the economic caravan is already moving on.

"All very well," we can almost hear the Eurosceptics cry, "but what use is it to be in a currency where interest rates are set on a one-size-fits-all basis, which may be inappropriate for Britain? Rates may be OK for France and Germany, but setting them so low here would fuel an inflationary binge that would wipe out the supposed benefits of the euro." And, to prove their point, the sceptics point across the Irish Sea to another booming economy apparently overstimulated by too-low rates.

Enter the IMF, whose new report on the Irish economy absolves the euro from responsibility for Ireland's highish inflation. More apposite, it seems, is the shortage of building land that has fuelled an unprecedented property boom, a social contract with the unions with over-generous tax cuts built-in, and a badly timed hike in cigarette duty. So it's not just the low interest rate that is driving up prices in Ireland. The news is far more encouraging than even the most fervent fan of the euro could have hoped for.

The opinion polls in this country show that, while most people are still opposed to the euro, they still see it as inevitable within, say, 10 years. This suggests that as a nation we may have a certain emotional attachment to the pound, but we know that one day we will have to come to terms with the euro for the sake of investment, jobs and living standards. All the news from the real economy is bringing that day closer. Let us hope that not too much damage is done before we bow to the inevitable.

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