Mr Whittam Smith uses the metaphor of a car with two drivers to condemn the separation of monetary and fiscal policy. Yet this is what we have now with the duo of Chancellor of the Exchequer running fiscal policy and Governor of the Bank of England having a say in monetary policy. Were the Bank of England to be completely independent, as even some Eurosceptics want, the separation would be complete. Yet this is widely acknowledged to be the best way to keep inflation down and economic growth up. A European Central Bank is likely to be more independent, and to run a better monetary policy, than any national central bank.
Gavyn Davies (29 July) argues that, had we been in EMU in 1989, the recession would have been dampened; but then, he says, the inability to devalue would "have greatly prolonged the recession, and slowed the recovery". The experience of France suggests that economic growth would have been more stable, and slightly higher on average over the first six years of the 1990s.
Stable growth is better than volatile growth even if the two average the same. Mr Davies also claims that today base rates would be 3.5 to 4 per cent (I agree), "and the consumer would no doubt be embarking on a vibrant boom". A government seeking re-election should then surely be seeking to opt in to the Euro as soon as possible.
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