Britain is tied to the Eurozone – so why keep it at arms length?

Europe does affect British economic fortunes, which is why it is so counterproductive to pretend "so

Another quarter, another set of negative GDP figures, another drop back in recession for the British economy. The much talked about, yet elusive, recovery seems to be slipping from our grasp once again.

Many, especially Keynesian economists and those on the left of the political spectrum, will tell you this was inevitable. No surprise. Nor is it surprising that the government has been quick to blame everyone else for the state of the British economy. That’s what politicians do best.

According to the government’s script what is really to blame for the economic predicament we are in is the sovereign debt crisis in the Eurozone and the economic crisis it has generated. With our main trading partners in economic contraction our chances for recovery are significantly reduced, the story goes. Not to mention that the rising cost of raw materials like petrol is pushing our inflation rates up, while the global banking crisis is forcing the Bank of England to inject billions in the British banking system. At the same time, the printing of money is reducing the value of our currency, making imports of German cars, Japanese DVDs and American smartphones we love so much more expensive. And all the above combined is making the Bank keep interest rates at levels so low that they are starting to become unsustainable.

So much for the cherished economic, monetary and fiscal independence of Britain. The fact of the matter is that the government is, to a large extent, right. Most of what a very open but small and peripheral economy does is affected (and often dictated) by events that take place elsewhere.

The value of our GDP, the level of our inflation and interest rates, the very health of our economy are, by the government’s own admission, dependant on outside, European as well as global, factors. All we can do is tighten our belts and hope people will keep lending us money in affordable terms (their words, not mine).

As a result it is a bit disingenuous for the government to go on exclaiming their holy duty to maintain our economic and monetary sovereignty one moment while the next admitting that the very notion of "sovereignty" is void of meaning in the context of the internationally integrated economy Britain is plugged in to.

We are not just affected by the state the European economy is in. We are the European economy. Our trade inflows and outflows, our financial services sector, our supply chains and the source (as well as destination) of investment are one with those of the EU. And for good reason. This is the biggest market in the world and one of the most mature and sophisticated economies. Britain prospers when the EU economy does well and it suffers when it stagnates.

The plot really thickens when one keeps in mind that the EU has engaged in a process of monetary integration, soon to be coupled with fiscal and political union. No matter what the immediate and short term problems of the Eurozone (and its institutional architecture) are, the Eurozone and its single currency are so systemically important for the EU (and global) economy that it is a matter of when rather than whether the Eurozone will sort itself out and continue its path towards becoming a global reserve currency.

Before the sovereign debt crisis in Greece and the burst of asset bubbles in Ireland and Spain the euro had become the most held currency and the de facto second reserve currency. It has maintained that status throughout the financial and debt crisis of 2008 and 2010 and it has also kept its value, while global powers like the US and China have verbally and practically shown their confidence in the euro.

As a result we will soon find ourselves in a world where the global economy will be dominated by two, maybe three, currencies: the US Dollar, the Euro and the Chinese Renminbi. A situation that according to academic research (pdf) will contribute to the re-balancing of the global economy, away from the uni-polar and destabilising current system and towards a more sustainable multi-polar system.

The question is what happens to small and peripheral economies like Britain’s, with a freely floating currency like Sterling, when they get caught up in the headwinds of those three global reserve currencies and the enormous economies that underpin them.

Some people are forecasting that Judgement Day is approaching for the Eurozone. But the Armageddon they are predicting (or hoping for) is not going to take place. It is actually Britain that will have to make some important judgement calls in the not so distant future about how it wishes to welcome this brave new world. On the side-lines, affected by the elements of economic weather but unable to have an effect on them. Or as part of a strong and global currency. The sooner we start discussing the merits of that question the more prepared we will be for when the time comes to make this decision.

European Central Bank President Mario Draghi. Photograph: Getty Images

Petros Fassoulas is the chairman of European Movement UK

Photo: Getty
Show Hide image

“I’m frightened, genuinely frightened”: how London terror attacks affect the rest of the country

What happens to tourism after terrorism? 

Like many children his age, Adele Pillinger’s six-year-old son is “obsessed” with dinosaurs. Last year, the mother of two from Silsden, West Yorkshire, booked a family trip to London so her two sons could visit the fossil-filled Natural History Museum. They were to go in October 2017 – next month. But last week, Pillinger cancelled the trip.

“I feel it’s too much of a risk,” says the 38-year-old, who made the decision to cancel after the Parsons Green tube attack last Friday. “I’ve got two young children… I wouldn’t put them in harm’s way and that’s what I feel like I’d be doing by taking them to London at the moment.”

Pillinger is not isolated in her decision. Although it is difficult to count the precise impact of terrorism on London tourism, the Westminster Bridge attack in March and London Bridge attack in June saw school trips being cancelled and many changing their plans to visit the capital. Headlines after terror often speak of resilient city-dwellers keeping calm and carrying on, but the effect of terrorism on the psyche – and plans – of others in the country is little discussed.
Adele's son, via Adele Pillinger
“I’m frightened. I’m genuinely frightened,” says Pillinger. “I feel genuinely sorry for you guys [Londoners] because you kind of have to crack on with it. I’m sure if it was happening on our doorstep we’d probably feel the same way… but I wouldn’t visit for pleasure at the moment, I can make a decision to not do it.” Instead, Pillinger plans to take her family mountain-biking in Wales.  

Cori Clarke, a 30-year-old teaching assistant from York, has recently decided against taking her six-year-old son Jude to visit his great-grandmother, who lives in London. “Last summer I took my daughter for a few days in London, a sort of girls’ weekend, and this year was going to be my son’s turn. But with what’s happened, I’m just not going to take him.”

Although she’s aware it may sound hypocritical, Clarke does agree with people who say that cancelling plans is “letting the terrorists win” – and she even persuaded her mother against cancelling her own separate trip, planned for November. “I would say you can’t let these people stop your plans, which I know is contradictory,” explains Clarke, “but I don’t want my son seeing anything; I think he’d be absolutely terrified if anything happened… I just thought it’s not worth it basically.”

Many other parents face similar decisions to Pillinger’s and Clarke’s. Primary school children were trapped in the Houses of Parliament during the Westminster attack in March, and schools across the country have been reassessing their planned trips to London. If schools go ahead with their plans, mums and dads then face the difficult decision of whether or not to isolate their children by pulling them out of the trip.

“I just said no, it just seemed too recent,” says Milli Brazier, a 27-year-old from Southend, Essex, who pulled her nine-year-old daughter out of a trip to visit the Science Museum after the Westminster attack. Though the school originally intended to cancel the trip, it went ahead after parents complained. Brazier and a few other parents decided against letting their children go.

“To be honest the school’s not the most organised school and the thought of if anything did happen… the idea of the school not being able to organise the children and keep them safe…” Brazier trails off. “I think as a parent if you’re not comfortable sending your child anywhere… if it’s not right for you as a parent, then you shouldn’t do it.”
Milli and her family, via Milli Brazier
Like Pillinger, the mother from Silsend, Brazier feels that the rest of the country doesn’t have to “carry on” like Londoners do after attacks. “If you live in London you have to carry on, but if you’re making an unnecessary trip to me it just seems a little bit pointless to take that risk when you don’t need to,” she says. “If I didn’t have children I’d probably do it myself but it’s different when you have children.”

Neither Pillinger, Brazier or Clarke know when they will feel comfortable enough to visit the capital again. “I don’t feel the government is doing enough to make people feel safe,” says Pillinger. When people accuse her of letting the terrorists “win” by changing her plans, she has a succinct reply.

“I would say that I think they’re already winning,” she says, “because we’re not doing anything about it. Everyone’s entitled to feel how they feel about it but I think they’re already winning because I’m frightened…

“It’s not normal what’s happening, it’s not normal and it’s not right and I do think the government needs to get a grip on it and do something more about it.”

By the end of the year, it will perhaps be easier to see the financial impact terrorism has had on London’s tourist industry. It's worth noting that, at present, you're more likely to be killed by a dog or by hot water than by a terrorist. But regardless, it is clear that some families' perception of the capital has changed. 

Amelia Tait is a technology and digital culture writer at the New Statesman.