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8/10/14

Britain: Why The ‘Poundzone’ Is As Sub-optimal A Currency Area As The Eurozone - Waltraud Schelkle

The great British public has at least one certainty: however bad the UK’s recent recession was, the Eurozone is doing worse. And not only UKIP supporters believe that this is the case: the consensus across the UK being that the euro is the joint currency of a motley assortment of countries that do not really fit together while there is enough similarity between the nations that make up the United Kingdom: England, Northern Ireland, Scotland and Wales. 

I have heard a former permanent secretary say on a panel at LSE earlier this year that there is just nothing that the UK economy can learn from the Eurozone but that the Eurozone in turn is probably doomed because it lacks ‘the glue’ that holds together the British currency union. There were a few Scottish visitors in the audience who couldn’t suppress an incredulous giggle.

But let’s concede that the Scots at least get the referendum that the Catalans would like to have and explore the economic case. As even general newspaper readers may know by now: “the Euro area is not an optimal currency area!” You get over 2,500 results if you put this phrase into Google and another 1,780 if you replace ‘optimal’ by ‘optimum’. Shock horror. But how worried should those poor creatures forced to use the euro – that is, the majority of continental Europeans – be about this verdict? Well, not more than the Brits who are forced to use the pound sterling.

Read more: Why The ‘Poundzone’ Is As Sub-optimal A Currency Area As The Eurozone

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