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8 September 2017

Why the euro is Jeremy Corbyn’s best friend

The Labour leader opposed the creation of the single currency. But now it's his biggest political ally. 

By Stephen Bush

The euro is booming as investors pile into the single currency, in the expectation that the coming years will see higher growth in the eurozone, and as it benefits from political instability in the United States and the United Kingdom hurting the value of the dollar and sterling.

Jeremy Corbyn was opposed to the euro from the beginning, but he has cause to thank it now. Why? Because the collapse in the value of the pound after Britain’s Brexit vote has raised the cost of buying goods from the eurozone, which has helped drive up prices of food and other commodities across the board. (It has also increased the cost of luxuries like holidays and eating out.) That has increased the pressure on wages, which meant that when Theresa May called the election, wages were falling in real terms.

Every government that has gone to the country when wages are falling has lost seats in the House of Commons, and May’s was no exception. In 2015, David Cameron got a helping hand because the fall in the oil price meant that there was actually a brief period of price deflation. So although wages were actually stagnant, it felt as if they were rising, as people’s cash went further.

The euro looks likely to strengthen, both on its own terms and against sterling, for the foreseeable future. (Perhaps an elusive “good Brexit” would see the pound recover some of its value.) That means that even if the government does take action to increase pay by lifting the public sector pay cap or hiking the national minimum wage, people will continue to feel that their pay packets are being squeezed, even if they are actually rising. That, of course, only boosts the prospects for both Labour and the Liberal Democrats at the next election. 

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