http://news.bbc.co.uk/1/hi/business/2970126.stm
http://news.bbc.co.uk/nol/shared/spl/hi/europe/03/euro/html/default.stm

The first time I came across published concerns relating to the Euro and the distinctive features of Britain’s housing market was in a collection of essays by Walter Eltis: Britain, Europe and EMU (2000).

The special significance is that Eltis was Michael Heseltine’s economic adviser when he was DTI minister in John Major’s government in the 1990s yet Heseltine at the time and subsequently is widely known to have been a leading advocate of the benefits to Britain from full membership of EMU. It would seem that he did not pay much heed to the advice he was getting from his economic adviser. Quoting Eltis:

“In much of continental Europe, familes obtain finance for home ownership or personal consumption far less readily. . . In consequence, aggregate mortgage debt is 60 pc of GDP in Britain but only 40 pc in Germany, 25 pc in France and less than 10 pc in Italy. The interest rates paid on these lower levels of personal debt are also less flexible than in the UK. The variable interest liabilities of the United Kingdom personal sector total 64 pc of GDP. They are only 16 pc in France, 3 pc in Germany and 2 pc in Italy.” [p.185]

It is these circumstances which explains why a change in short-term interest rates in Britain, as set by the Bank of England’s Monetary Policy Committee, has a virtually immediate impact on the monthly disposable incomes of so many households in Britain and why the transmission mechanism of monetary policy changes in Britain is therefore so much more powerful compared with national economies in much of mainland Europe. Quoting Eltis again [p.186]:

“An independent committee . . reported in May 1997 that: ‘Simulations on macroeconomic models run by national central banks suggest that, for the UK, the impact of an interest rate change on domestic demand after two years is four times the EU average.’”

The no-euro campaign’s pamphet on: UK mortgages and the euro, by Graeme Leach of the IoD, is here:
http://www.no-euro.com/factsfigures/pdf/mortgages.pdf

Since then, repeated policy statements by the Chancellor of the Exchequer have indicated that he believes there has been no subsequent need to revise the conclusions of that assessment so far.

The plain fact is that Britain’s economy has performed better than the other major European economies in the period since June 2003 in respect of both GDP growth and unemployment and mostly on controlling inflation as well until a brief period very recently.

The British economy does have a problem with a house price bubble - as the OECD recently commented - but that would likely be exacerbated by the loss of national monetary autonomy and aligning prevailing interest rates in Britain with the substantially lower interest rates prevailing in the Eurozone.

It was often claimed that inward investment into Britain would fall away if Britain failed to join the Euro but that has not transpired - quite the reverse, in fact:

“The UK attracted a record number of investment projects from foreign firms last year, official figures have shown.

“Government body UK Trade and Investment said nearly 40,000 jobs were created in 2004/05 from 1,066 investment projects.

“That was an increase from the 25,463 jobs created by 811 projects in the previous year.”
http://news.bbc.co.uk/1/hi/business/4632923.stm

“In a remarkably frank interview with The Times, the one-time bogeyman of Eurosceptics also predicted that Britain would stay out for years, not least because Gordon Brown was so ‘passionate about his contempt for Europe’. . .

“But his most surprising comments were on the euro. He lamented that EU leaders had failed to heed his warning that monetary union must be matched with close co-ordination of economic policies, and argued that the euro was consequently less attractive than it could have been. . . ”
http://www.timesonline.co.uk/article/0,,724-967150,00.html

The most lucid explanation I could find on the internet was by the BBC - and it is remarkably unpartisan:

http://newswww.bbc.net.uk/1/hi/world/europe/4721307.stm

If anyone knows of a better account on the web, I would appreciate knowing about it and the relating link.

That is overlooking a lot.

1. There are national subsidies, too.
2. Prices are driven up, that hurts a lot in a time where low paying jobs have to be created.

On a related note, on tax policy. Is taxation of consumption better for employment than taxation on income? Taxation on income means that labor intensive goods are discriminated against and in addition, imported goods are not hit by taxation on icome.

“On 22-23 March 2005, the Spring Council discussed the Commission’s mid-term review of the Lisbon strategy for economic, social and environmental renewal. More focus on growth and employment, simplification and national ownership via national action plans are the key elements to relaunch the Lisbon reforms agenda.”
http://www.euractiv.com/Article?tcmuri=tcm:29-131891-16&type=LinksDossier

“The 25 European Union leaders want to give new impetus to economic reforms - especially to make their countries more competitive. ”
http://news.bbc.co.uk/2/hi/business/4373485.stm

The Lisbon Agenda seems to have been forgotten - again. The future strength and competitiveness of European business in a globalised economy is not going to depend on agriculture, for heaven’s sake. The evident EU priorities don’t make any sense except in terms of protecting narrow vested interests.

We already know that most of the CAP spend disproportionately benefits big land owners and not the mythical small and peasant farmers of legend who need income support for social reasons.