5 ms·

To be fair, they didn't really opt out of the Euro. It is completely unfeasible at the time. Originally they were going to go with the Euro and to start the t

To be fair, they didn't really opt out of the Euro. It is completely unfeasible at the time. Originally they were going to go with the Euro and to start the transition they linked the pound to the deutsche mark. However, the German economy was crushing the British economy and this pushed interest rates in the UK to over 10% (Fun fact: I was getting 12% interest in my savings account in the UK). Mortgage rates were about 18% IIRC and this sparked a bursting of the real estate bubble in London. Prices fell 25% in 1992 as banks foreclosed on under water properties. The Japanese bought up a lot of properties, which buoyed the market somewhat, but it wasn't until the pound delinked from the deutsche mark that the market could recover properly. I remember that day well as I lost half the value in my UK bank account (so much for 12% interest ;-) ). Everybody knew that the UK couldn't adopt the euro which is why they "opted out".

makomk 8y ago
Part of the reason the Eurozone's in the mess it is right now is that, for the most part, the EU didn't let the fact that the Euro was completely infeasible for particular countries get in the way of converting them over to it anyway. The UK wasn't the only country with similar problems, but others like Italy didn't opt out and are in a fine state now as a result. In that sense the British opt-out worked well for us.
- wahern 8y ago
  By that logic the US shouldn't have a single currency, either. I get that a single currency is problematic. Arguably it is problematic even in the US, after all this time. But it doesn't necessarily follow that a single currency is fundamentally infeasible. The US isn't crippled because of it. By contrast, the poster gave a very concrete explanation why adoption of the Euro by the UK was [then] infeasible.
  - mikekchar 8y ago
    I have to say that I actually agree with makomk. It was a good idea to opt out of the Euro. It was good for the UK and it was good for the EU. The issue I was originally trying to address was the impression that the UK had some special negotiating power to opt out of things they didn't want. In this case, I think it was mutually beneficial. The point about other European countries is well taken and I believe there have been talks to get some countries out of the Euro zone. In part this is a big deal because countries like Germany don't want to prop up countries that are in financial difficulty. They have no controls for dealing with these problems and the result is that you need cash infusions from the EU to keep it all swimming. But that's really the point, isn't it? How much of a "Union" do you want? It even gets to the heart of why some people want Briton to leave the EU.
    - makomk 8y ago
      On paper at least, the UK and Denmark do have special opt-outs from the Euro while all the other EU states are legally bound to join it. In reality it's likely that several of the non-Eurozone states will simply never join it and there's nothing to ensure that they ever do.
  - lmm 8y ago
    > By that logic the US shouldn't have a single currency, either. The US is at least somewhat willing to tax money made in California and spend the takings in Michigan. Greece or Italy gets the worst of both worlds: they can't devalue their currency to make their industries competitive with Germany, but they don't receive much share of German taxes either.
    - AstralStorm 8y ago
      They actually got quite a chunk until the rampant mismanagement was uncovered, but indeed not as much as states in the USA.
  - yomly 8y ago
    The US and the EU really aren't comparable, as much as people like to model them as analogous. In Europe you have tens of countries that speak different languages and have cultures that go back 1000-2000 years. That, along with a bunch of political baggage and that each nation has its own fiscal policy, and the starting points between EU and US are very very different. I would instead extend your concession that given the single currency already exhibits creaks in the US, imagine how hard it would be to manage in the EU.
    - wahern 8y ago
      Sure, it's harder in the EU and more problematic in the EU. But so what? It's one thing to argue soberly that it's not working well for such-and-such country. It's another to exclaim, as is most often done, that it's a complete and utter disaster when it's plainly obvious it's not. As monetary systems go most nations would love to be in the EU, even with all the very real and substantial downsides. The EU is a complex institution and the single currency is only part of it. An integral part, to be sure, but IMO we (the political chatter class) put far too much emphasis on monetary policy, both as our source of problems and a source of solutions. Often it's a distraction or excuse for more substantive issues, like political and fiscal ineptitude. Take Greece for example--when push came to shove most observers, as well, as Greeks themselves, decided that leaving the Euro was not the answer. When forced to soberly assess the situation it turns out that the Euro wasn't the most pressing problem and that on balance they were better off enduring. Regarding comparison with the United States, let's not forget that political battles over a national bank dominated national politics for almost the first 50 years. Similar to issues over tariffs, what benefited the north was often to the detriment of the south, and vice-versa. And this was at a time when there were virtually no direct federal wealth transfers, and federal revenue came predominately from tariffs, which pitted not only the north (net importers) against the south (net exporters), but both against the federal government (tariffs were placed on both imports and exports). If the interplay between monetary policy and trade competitiveness was understood at the time and today's Euro critics were teleported back in time, who knows what might have happened!
    - philwelch 8y ago
      Europe also has a history that goes back 1000-2000 years of disparate countries unifying. Germany, for example, is the descendant of the 19th century North German Confederation, a Prussian-dominated customs union between north German states, which in itself was an effort to recreate the earlier German Confederation without involving those pesky Habsburgs. The Holy Roman Empire was a unified confederation of German, Italian, Swiss, and Bohemian states that allowed large amounts of autonomy and sovereignty within its borders. In fact, our modern conception of sovereignty dates from the Peace of Westphalia, which ended a thirty-year-long war (imaginatively named the Thirty Years War) fought largely over the authority of, once again, those pesky Habsburgs to tell HRE member states what their state religion should be. Britain was formed by the unification of England and Scotland, both of which are still legally considered separate countries under British law. Italy was formed as a union of Italian states, largely from an effort to overthrow Habsburg rule. Spain was formed as a union of Iberian kingdoms (that eventually fell under a branch of the Habsburg dynasty which went extinct due to inbreeding, leading to a war of succession.) Poland and Lithuania had varying degrees of unification from 1385 until 1795, when the then-unified country was torn into pieces and partitioned off into their surrounding empires, including Habsburg Austria. So really, given European history, it seems like most European countries don't really have a problem joining together into larger unions, so long as those unions aren't ruled by Habsburgs. The closest the EU ever got to that was when Otto and Karl were Members of the European Parliament up until 1999, so hopefully we're fine.
- davedx 8y ago
  > the Euro was completely infeasible for particular countries Which countries was the Euro "completely infeasible" for, and what are the facts demonstrating this statement is true? It's a very strong assertion.

makomk 8y ago

Part of the reason the Eurozone's in the mess it is right now is that, for the most part, the EU didn't let the fact that the Euro was completely infeasible for particular countries get in the way of converting them over to it anyway. The UK wasn't the only country with similar problems, but others like Italy didn't opt out and are in a fine state now as a result. In that sense the British opt-out worked well for us.

wahern 8y ago
By that logic the US shouldn't have a single currency, either. I get that a single currency is problematic. Arguably it is problematic even in the US, after all this time. But it doesn't necessarily follow that a single currency is fundamentally infeasible. The US isn't crippled because of it. By contrast, the poster gave a very concrete explanation why adoption of the Euro by the UK was [then] infeasible.
- mikekchar 8y ago
  I have to say that I actually agree with makomk. It was a good idea to opt out of the Euro. It was good for the UK and it was good for the EU. The issue I was originally trying to address was the impression that the UK had some special negotiating power to opt out of things they didn't want. In this case, I think it was mutually beneficial. The point about other European countries is well taken and I believe there have been talks to get some countries out of the Euro zone. In part this is a big deal because countries like Germany don't want to prop up countries that are in financial difficulty. They have no controls for dealing with these problems and the result is that you need cash infusions from the EU to keep it all swimming. But that's really the point, isn't it? How much of a "Union" do you want? It even gets to the heart of why some people want Briton to leave the EU.
  - makomk 8y ago
    On paper at least, the UK and Denmark do have special opt-outs from the Euro while all the other EU states are legally bound to join it. In reality it's likely that several of the non-Eurozone states will simply never join it and there's nothing to ensure that they ever do.
- lmm 8y ago
  > By that logic the US shouldn't have a single currency, either. The US is at least somewhat willing to tax money made in California and spend the takings in Michigan. Greece or Italy gets the worst of both worlds: they can't devalue their currency to make their industries competitive with Germany, but they don't receive much share of German taxes either.
  - AstralStorm 8y ago
    They actually got quite a chunk until the rampant mismanagement was uncovered, but indeed not as much as states in the USA.
- yomly 8y ago
  The US and the EU really aren't comparable, as much as people like to model them as analogous. In Europe you have tens of countries that speak different languages and have cultures that go back 1000-2000 years. That, along with a bunch of political baggage and that each nation has its own fiscal policy, and the starting points between EU and US are very very different. I would instead extend your concession that given the single currency already exhibits creaks in the US, imagine how hard it would be to manage in the EU.
  - wahern 8y ago
    Sure, it's harder in the EU and more problematic in the EU. But so what? It's one thing to argue soberly that it's not working well for such-and-such country. It's another to exclaim, as is most often done, that it's a complete and utter disaster when it's plainly obvious it's not. As monetary systems go most nations would love to be in the EU, even with all the very real and substantial downsides. The EU is a complex institution and the single currency is only part of it. An integral part, to be sure, but IMO we (the political chatter class) put far too much emphasis on monetary policy, both as our source of problems and a source of solutions. Often it's a distraction or excuse for more substantive issues, like political and fiscal ineptitude. Take Greece for example--when push came to shove most observers, as well, as Greeks themselves, decided that leaving the Euro was not the answer. When forced to soberly assess the situation it turns out that the Euro wasn't the most pressing problem and that on balance they were better off enduring. Regarding comparison with the United States, let's not forget that political battles over a national bank dominated national politics for almost the first 50 years. Similar to issues over tariffs, what benefited the north was often to the detriment of the south, and vice-versa. And this was at a time when there were virtually no direct federal wealth transfers, and federal revenue came predominately from tariffs, which pitted not only the north (net importers) against the south (net exporters), but both against the federal government (tariffs were placed on both imports and exports). If the interplay between monetary policy and trade competitiveness was understood at the time and today's Euro critics were teleported back in time, who knows what might have happened!
  - philwelch 8y ago
    Europe also has a history that goes back 1000-2000 years of disparate countries unifying. Germany, for example, is the descendant of the 19th century North German Confederation, a Prussian-dominated customs union between north German states, which in itself was an effort to recreate the earlier German Confederation without involving those pesky Habsburgs. The Holy Roman Empire was a unified confederation of German, Italian, Swiss, and Bohemian states that allowed large amounts of autonomy and sovereignty within its borders. In fact, our modern conception of sovereignty dates from the Peace of Westphalia, which ended a thirty-year-long war (imaginatively named the Thirty Years War) fought largely over the authority of, once again, those pesky Habsburgs to tell HRE member states what their state religion should be. Britain was formed by the unification of England and Scotland, both of which are still legally considered separate countries under British law. Italy was formed as a union of Italian states, largely from an effort to overthrow Habsburg rule. Spain was formed as a union of Iberian kingdoms (that eventually fell under a branch of the Habsburg dynasty which went extinct due to inbreeding, leading to a war of succession.) Poland and Lithuania had varying degrees of unification from 1385 until 1795, when the then-unified country was torn into pieces and partitioned off into their surrounding empires, including Habsburg Austria. So really, given European history, it seems like most European countries don't really have a problem joining together into larger unions, so long as those unions aren't ruled by Habsburgs. The closest the EU ever got to that was when Otto and Karl were Members of the European Parliament up until 1999, so hopefully we're fine.
davedx 8y ago
> the Euro was completely infeasible for particular countries Which countries was the Euro "completely infeasible" for, and what are the facts demonstrating this statement is true? It's a very strong assertion.