Not only that, the Icelandic government is desperate to join the Euro to help solve its debt problem but has so far been refused membership. It cheekily wanted to join the Euro, but not the EU. It was given short shrift.
Chris Dillow, as ever, has the economic lowdown on why right-wingers are wrong to think that an independent central bank would have helped a country avoid the world debt crisis. To surmise - No central bank saw the credit crunch coming. Basically the right-wing argument can be honestly put as:-
'Britain and Ireland will never be as competitive as Germany or France so we need our own currency so we can devalue away our uncompetitiveness with a depreciating currency. The long term cost of this policy is higher interest rates (which we rich in the City actually quite like because it is money for nothing) and higher inflation. We think this is a price worth paying.'Ireland is actually an embarrassment to the right-wingers and so they are trying to shift attention - the media is once again letting the right re-write history.
Ireland was the poster boy of the right, but its austerity cuts have not led to salvation, just bankruptcy and even more austerity cuts. As the austerity bug catchs on around the world, the world plunges deeper into crisis. I can see even bigger problems ahead for the Anglo-Saxon economies.
Now for some predictions and I look forward to revisiting these predictions in 5 or 10 years time. If you are reading this then and remember what I wrote, especially if you disagreed at the time, it will be interesting to see how close I am to being absolutely correct. I am fairly confident I will be. But before I outline my predictions I want to look back at what I wrote in an essay in April 2001 entitled 'Britain and the Euro'. Here are some choice quotes:-
One of the dangers to the stability of the Euro is the power of the global financial markets. Each day more than $1.5 trillion is traded in foreign exchange (forex) markets and 95% of the movement of exchange rates has nothing to do with any 'real' economic activity but is the result of currency speculators betting on the movement of currencies. Actual forex reserves in the hands of governments in 1998 totalled $1.6 trillion or just over a days trading. Despite all the pressure on the Euro from the markets, the only way they can beat the Euro is if the Eurozone countries lose their nerve. It would be prohibitively expensive for any country to leave and this will be the glue that binds them closer together.
The current low inflation and falling unemployment that the UK is experiencing, one would suspect, are being fuelled by a consumer credit boom. The balance of payments deficit is a key indicator that this is so. What a balance of payments deficit indicates is that consumption is higher than income. The extra consumption is being supplied by foreign production, which is being paid for by borrowing. This is obviously a situation that cannot continue indefinitely. The UK cannot be far away from a recession, maybe 5 years. [ok, it took 7 years but not far wrong]I think this 2001 essay predicts the last 10 years quite clearly, the markets liberated by Thatcher and Reagan have wreaked havoc on the world and are a threat to democracy itself if not reformed and the UK's lack of productivity, particularly in the low skill levels of its workforce is the real problem that it needs to address to achieve growth. Investment in education is still far below its Eurozone competitors. Membership of the Euro would not solve these problems but would force them to be addressed more quickly. Now to my predictions for the next 10 years.
1. No country will leave the Euro and more countries will join.
2. The Eurozone will grow faster than either the US or UK over the next 5-10 years.
3. There will be further political union between Eurozone states.
4. The EU budget will increase exponentially.
How do I know this? Well thankfully the UK press cannot wish the Euro away no matter how hard they try. Leaving the Euro would cost a country a vast amount and leave them a trading pariah, neither of these would help its economy. Germany will be reluctant but come to see that it is in its own interests to fund the poorer nations of the Euro. The rewards of a trading bloc this size with a strong currency are massive - more political union, tax harmunisation and fiscal transfers are on the agenda, watch out Murdoch and the Mail!!