Should Britain Reconsider Joining Euro?

One small island nation on the northwestern edge of Europe is counting its blessings. Like Iceland, its banks threw cash at investors eager to buy businesses and properties across the European Union.

But the luck of the Irish is that they joined the euro, sealing them into one of the most stable currencies and sheltering them from the worst of the global storm.

"We have all seen the Iceland situation and if we are out on our own something similar could have happened in Ireland," Irish Foreign Minister Micheal Martin said last month.

Ireland — a nation of just over 4 million people — has a seat around the table at regular talks with European powerhouses Germany and France and can assume that other euro nations would not let its economy collapse.

Other European countries are now looking enviously at the euro in light of the financial crisis. Denmark and Sweden are rethinking their refusal to sign up while Poland is speeding up efforts to join.

And even Britain may be tempted, one senior EU official said — although the British government was swift to deny any plan to join soon. "Some British politicians have already told me, 'If we had the euro, we would have been better off," EU Commission President Jose Manuel Barroso told French RTL radio last weekend. "The people who matter in Britain are currently thinking about it."

Britain's business secretary Peter Mandelson said Wednesday that Britain was right to keep a long-term goal of euro membership but it was "not for now."

Iceland's curse was the combination of a plunging currency and the popularity of high-interest foreign currency loans. That means monthly loan repayments for cars and homes have doubled this year, hitting Icelanders hard as the economy teeters and jobs are slashed.

Property-hungry buyers in Hungary and Latvia are suffering a similar fate. The two euro joiners in the region — Slovenia which entered in 2007 and Slovakia which will adopt it next year — have escaped this trouble.

Katinka Barysch, an analyst at the London-based Centre for European Reform think tank, said the currency swings of recent months have sold the benefits of the euro as a safe haven to many east European states.

"The very stark experience of being in the middle of a global economic storm means they have felt very cold and uncomfortable," she said. The European Commission claims the euro sheltered its current 15 members from the worst "external shocks" as it boosted trade and investment in the region and forced governments to pay off debt.

But it was the political clout of euro-zone nations making key decisions on how they would respond to the financial crisis in October that rankled Denmark and Sweden. Both complained they were shut out of emergency talks hosted by French President Nicolas Sarkozy. "I would have wished that Denmark also was there," said Danish Prime Minister Anders Fogh Rasmussen, who favors bringing his country into the euro. "That is a loss of political influence."

Britain's size — it is the second-largest economy in the EU — meant it had no such worries. It was the only non-euro nation at the summit. The prime minister is no euro-enthusiast — like most British voters. Poll after poll consistently show that a referendum on membership would be rejected.

But some advocates think it's time for Britain to rethink its stance — as the pound sinks against the euro.

Will Hutton, a director of the Work Foundation, wrote in the Observer newspaper recently that Britain would gain a new international importance by giving up the pound.

"Britain would become a member of a reserve currency zone at a competitive level, offering us a key role in the emergent debate about the governance of globalization and the international financial system. We would remain prosperous and we would matter," he wrote. But many Britons are firmly attached to the pound.

"When a nation agrees to shelve its currency, its identity is sure to follow. We are not Europe. We are this island. Our borders do not necessitate a single European currency," said chef Oliver Moesley, 57, from London.

Story from Associated Press

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