Sir: Hamish McRae's attack on European monetary union rests on the fallacy that governments can fine-tune the economy by fiscal and monetary policies. The best a government can do is give a simple inflation rule to an independent central bank, and then work on decreasing the inefficiencies in the system. That is what EMU is attempting to do: an independent central bank and the elimination of the inefficiency of 14 separate currencies.
If a region is suffering economically, lowering the world prices of its products (by devaluation, for instance) is rarely going to work. It is by increasing the quality and uniqueness of its output that prosperity will be found. Look at the difference in quality of manufactures from a strong currency country like Germany and those from a weak currency country like Britain.
The debate in Germany over economic performance is not about the strength of the mark but about the loss of innovation. Germans know that future growth is guaranteed not by making the same products cheaper but by making them better. Britain will not stop its century old decline until it understands this.
21 DecemberReuse content