Just weeks before the Jan. 1 introduction of euro notes and coins, British Prime Minister Tony Blair gave his most pro-euro speech yet, saying that from the 1950s through the present British leaders had underestimated the drive for European integration, and that Britain had paid the price. What he didn't say was that Continental Europe has paid a price as well. Despite years of progress, the European Union remains mired in heavy regulation, with a less-than-competent European Central Bank hamstrung by treaties that limit its monetary action.
Say what you will about the excesses of the Thatcherite revolution, but Britain has benefited tremendously from economic deregulation. And if there is anything the British know how to do well, it is how to run a central bank. The Bank of England has served the country extremely well over the centuries. In addition, the British government has shown finesse and flexibility in using fiscal policy. The result has been a more dynamic economy, lower unemployment, with more entrepreneurs and startups than the EU.
For Britain to consider entering the euro bloc, the EU must consider changing the Maastricht Treaty that set the rules for monetary and fiscal policy. While ECB President Willem F. Duisenberg has been ham-fisted in running the ECB, it must be said that the Maastricht Treaty restricts his actions only to inflation. The ECB cannot take growth into consideration when it deliberates--a ridiculous constraint that has kept European growth subpar for years. The treaty also restrains EU fiscal policy, putting it in a straitjacket.
A British presence in the euro bloc would increase the pressure for deregulation and competition, add expertise to the running of central bank policy, and raise the entrepreneurial animal spirits of the general population. Britain, for its part, would gain frictionless access to its largest and nearest trading and investing partners, doing away with the expense of moving between currencies. Most of its corporations already do most of their business in euros.
This is an important moment in world history. In Afghanistan, Britain has proved, once again, that it can play a significant role on the world scene while Europe trails behind. Russia is on the rise, Turkey is very important, and the U.S. is more powerful than ever. Europe needs Britain as much as Britain needs Europe. It's time for both to act.
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