Flipping the Coin of the Realm to Euro: a Sterling Idea?
LONDON — Morris Barton, council leader on Britain's Isle of Wight, thought he had a good idea.
He persuaded fellow councilors on the small island off England's south coast to mint their own coins and call them "ecus" (European currency units). Tourists, Barton thought, would be attracted by the novelty of trading in something other than pounds and pence. The island's economy would prosper.
But last Friday he learned how jealous the British government is of the national currency. The Treasury in London, citing the 1971 Coinage Act, ordered the council to withdraw its ecus from circulation immediately and stick to the pound sterling.
The aggrieved leader of the patch of land where Queen Victoria used to take her summer holidays complained: "They are using a sledgehammer to crack a walnut." But he had no option but to comply.
This clash between the custodians of the pound and a small local authority might have gone unnoticed were it not for the fact that the most divisive debate in British politics right now is over currency.
Opinion polls indicate that, unlike Councillor Barton, most citizens of the United Kingdom are sharply averse to ditching what is popularly known as the "quid" (or pound) and replacing it with a European coin called the "euro". (Until last year it was going to be called the "ecu," like the Isle of Wight's unlawful currency, but Germany's Chancellor Helmut Kohl persuaded other European Union (EU) leaders to change its name.)
British passions tend to run hard at a mere mention of the euro.
In London's Soho fruit and vegetable market, a dozen stallholders, asked about their currency preference, unanimously supported retention of the pound.
One said: "If we switch to the euro, Europe in the shape of Germany will end up controlling our economy."
Another stallholder took issue with the name "euro" and asked: "Who would want to do business in a currency with such a pathetic-sounding name?"
Some - though not all - of the debate about the euro in national politics is conducted at a higher level than that.
Sir Edward Heath, the former prime minister, has pointed out the advantages to travelers in Europe of not having to switch currencies as they go, losing out to the money-changers with every transaction.
Kenneth Clarke, chancellor of the Exchequer and one of the few proclaimed euro-enthusiasts in the British Cabinet, has noted how much easier it would be for companies to trade across borders in a common currency, rather than juggle about a dozen currencies, as happens now.
But some respected politicians and analysts argue the opposite case. Bill Cash, leader of the Conservative Party's "euro-skeptics" in the House of Commons, says: "You can't have a single currency without a single European bank, and that would almost certainly be located in Germany. We would end up having our economic policies dictated by foreigners."
More sophisticated, and typical of the views of a broad band of British politicians, is the case put forward by Hamish McRae, a leading economic and financial analyst. He contends that if Britain stays out of monetary union with the rest of Europe, it will safeguard itself against any disasters that might follow if the experiment collapses.
Britain staying out, Mr. McRae comments, "is not a petulant, foot-dragging exercise. It is an insurance policy against failure."
But in spite of popular reluctance and the various efforts by groups like Sir James Goldsmith's Referendum Party, which opposes a single currency for Europe, most economists have a hunch that Europe is bound to adopt a single currency anyway, and that Britain, however reluctantly, will be dragged into using it sooner or later.