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Monday, 22nd April 2024
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Obstacles to UK joining euro on the increase - Sir Edward Back  
For the time being, at least, the immediate obstacles to UK membership of the euro have recently tended to increase, Sir Edward George, former governor of The Bank Of England told attendees at an AIB Capital Markets client event in the IFSC on May 13th.
AAccording to George, ‘Currency forecasting is more an art than a science. This applies to the question as to how sterling will perform in the future and to the issue of an appropriate exchange rate for possible euro entry. There is no doubt that with half of the UK’s external trade with the eurozone, there would be benefits from exchange rate stability between sterling and the euro. However, this would only guarantee nominal exchange rate stability,’ he said.

‘There are also other benefits in the form of financial market integration and the narrowing of spreads. However, there were also potential downsides, particularly the one-size fits all nature of interest rate policy in the Eurozone. This problem was evident in the present situation, where UK interest rates were already significantly higher than those in the Eurozone and may continue gradually to increase, whereas Eurozone interest rates seemed less likely to rise in the short-term. For the time being, at least, the immediate obstacles to UK membership of the euro have recently tended to increase,’ he added.

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