There was a time when joining the Euro was a big issue, frequently debated in the UK. With Brexit referendum, it has become almost irrelevant. However, if leaving the EU proves disastrous and public opinions changes – rejoining the EU, may well involve signing up to the Euro – as new members may not get the opt-out, the UK received.
Reasons not to Join The Euro
1. No Devaluation. In the Euro, you can’t devalue if your currency becomes uncompetitive. This has been a significant problem for Euro countries like Spain, Italy and Greece. Compared to Germany, these countries have seen higher wage growth, higher inflation and lower productivity growth. This means their exports become uncompetitive leading to lower demand and lower growth.
- This is reflected in large current account deficits in these southern EU economies. Greece, Portugal and Spain all had a current account deficit of 10% of GDP or more – a very serious economic imbalance.
- By contrast, the UK has been able to devalue, restoring our competitiveness and giving our economy more flexibility.
