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In union there is strength - UK & World Politics
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peterharvey
uk_world
peterharvey
In union there is strength
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(Deleted comment)
peterharvey From: peterharvey Date: June 1st, 2004 08:33 pm (UTC) (Link)
Mr Teeth,

[interesting point, although I think Poland is in the modern equivilent of the ERM now.]

You may be right, but the ERM is a system not a guarantee – as the UK found out when Soros decided to have a go at sterling. There’s no protection there. However, the applicant countries are under an obligation to adopt the euro (unlike existing members) and are going through the process of getting their economies in shape to do so. In the event of any applicant country’s currency being attacked, there would be some support from the eurozone, I am sure.

Peter
(Deleted comment)
peterharvey From: peterharvey Date: June 3rd, 2004 11:04 am (UTC) (Link)
Mr Teeth,

[That was then, this is now. Spain's strength to stand up to America comes from the Euro's existance not actually Spanish membership. Ditto Poland and Britain. We've much more trade with the Eurozone than America and American monetary influence reflects that.]

I agree that an old-fashioned trade war is less likely nowadays, not least because the WTO would put a stop to it more rapidly than would have been the case in the past. But I can’t accept that the United Kingdom or any other non-euro country has its currency protected by virtue of being in the EU and trading with the eurozone. I am quite sure that the Fed has sufficient strategic supplies of sterling (and also of zloty, Danish krone, etc.) to smash the currency if it dropped them all on the market at once. But even if it doesn’t, it certainly has enough dollars to be able to gobble up any of those currencies at a rate that would send the exchange rate through the roof in a matter of days, destroying those countries’ trade with third parties. Remember, it was just after the row between and the USA last year that the euro began to rise strongly against the dollar, hurting Germany and some other countries’ exports. I am not at all sure that that was just a coincidence.

The reason given by the anti-euro people in Britain is precisely that they do want sterling to be able to move against other currencies independently of the euro, though this is usually dressed up in the nationalist pretence that the currency floats freely on a free market, with the British government having ultimate sovereign control over it – not that it allows the Americans to manipulate it if they want.

Peter
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