Addressing a mixed group of UK and German parliamentarians at the weekend, I raised a few eyebrows by predicting that Britain's possible membership of the Euro is likely to re-enter our domestic political debate.
I have no personal enthusiasm for joining the Euro, and believe that in both the short and long terms such a move would be very much against our economic and political interests. But others think differently, and will feel that their time is coming.
Sure enough, Steve Richards in a lengthy article in the Independent takes up the case.
I recall our last economic downturn in 1989 - 1992. There may be readers whose memories are better than mine, but my recollection is that talk of the UK joining the Exchange Rate Mechanism (ERM) went from being highly speculative to being the avowed policy of all three major political parties, and respected economic journalists in publications like the FT and the Economist in a very short period of time - roughly 1988 to our entry in October 1990. Joining the Euro is obviously a far bigger deal than joining the ERM, I merely make the comparison to draw attention to how quickly exchange rate policy can change in an economic downturn.
Like most observers, I believe that any forthcoming UK recession will likely be worse than that experienced in the Eurozone - mainly due to our greater indebtedness, our larger budget deficit, our greater dependence on financial services for our GDP and our high levels of public spending. Sterling is already at an all-time low against the Euro (the equivalent, by the way of 2.52 against the old Deutschmark, versus our old ERM central rate of 2.95). British holidaymakers, owners of second homes in France and Spain, day-trippers and so on, were already feeling the pinch in the Summer, even before the latest Sterling crisis on the back of our banking problems.
So, is UK entry into the Euro quite so far-fetched? And would Gordon Brown become a supporter? A few arguments against spring to mind immediately. Some of these are strong, but on each I can imagine a counter-argument could and would be floated by the Euro-enthusiasts.
The first is that Gordon Brown has personally been dead set against it. This is true, but in recent weeks he has torn up his own Fiscal Rules and brought back Peter Mandelson to the Cabinet. He has already re-written his own raison d'etre. Labour is committed to a referendum on Euro entry - but they were also committed to a referendum on the EU Constitution/ Lisbon Treaty too, which was conveniently ignored. Also, Brown will have precious little as a legacy - could bringing Britain into the Euro do the job for him?
Second, would the existing Eurozone countries allow Britain in? In theory, and I can't recall the precise criteria, Sterling would need to spend some time back in the ERM, and the UK would need to fulfill the various Maastricht criteria, but I just have a feeling that key European leaders would be happy to see the rules overlooked for the prize of gaining Britain into the Euro.
Third, would British public opinion change sufficiently and radically in favour? I think this is possible, if the downturn is as severe as some commentators and economists are suggesting. I recall public opinion in 1990 was right behind the move to join the ERM.
This is all highly speculative, of course, but I think we in the Conservative Party need to be ready for this debate. One of the great curiosities of the recent Conference season was the Lib Dems dropping their policy of supporting Britain's entry into the Euro. It was simply bizarre to have a policy for ten years or more that was both wrong and unpopular, but to junk it on the eve of the Euro making a political comeback made even less sense.
Could Brown be desperate enough to gamble all on the Euro? Unlikely, but I wouldn't rule it out entirely.
