Monday, Apr 23, 2018
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A pound of prevention

The sale of a product or a policy depends partly on the quality of the product and partly on the credibility of the salesperson. The British government's decision to postpone the pound's amalgamation into the euro zone, announced this week, falls clearly in that category.

The issue for the United Kingdom is both economic and political. On the economic side, the long-time position of the British government is that it makes sense for the pound to join the European Union financial community. It facilitates British trade with the rest of the EU and the world, it makes international settlements much easier and, in overall European terms, the punch of the pound is added to the financial weight of the EU.

The immediate financial argument is less strong. It so happens that the economic growth rates of the three EU member countries outside the euro zone - the United Kingdom, Sweden, and Denmark - are higher than those of the 12 EU countries in the euro zone. British economic growth is projected to be at 2.1 percent in 2003. U.K. unemployment is lower than that of the euro-zone countries.

But the economy isn't what it is really about. It is rather that the Labor Party government of British Prime Minister Tony Blair, though it has a safe majority in the House of Commons, is not strong at the moment in terms of credibility with the British population.

It would need considerable credibility just to sell the idea of the loss of some British financial independence to a still somewhat euro-skeptic British population. The British attitude toward Europe has always been subject to some caricature - the famous weather report: “Fog over the Channel, Continent cut off” as an example - but the British remember a lot with respect to the Continent, including World War II when the rest of Europe fell easily under the Nazi heel.

One could also say that they just don't want to give up their famously complex but fun currency - pounds, shillings, and pence. But what the Blair government really found itself face-to-face with when it had to make this week's decision on the euro was the fact that it has some serious holes in its side.

The British population never was crazy about the Iraq war, and has taken very hard the fact that Mr. Blair's government probably used weak intelligence to sell it. The British call it the “dodgy dossier.”

The Blair government is also vulnerable because of sagging infrastructure. Each week reveals new failures of the national health service. The United Kingdom has consumed capital in the area of schools, roads, trains, and bridges for many years, and the holes are showing.

Mr. Blair's government will have to face the euro issue before the next elections, but under the British system those do not have to take place before 2006, and he can choose his moment. As has been said before by British leaders, including Mr. Blair's government, entry into the euro zone will come, but it will take a while.

Now is clearly not the moment. If Mr. Blair put joining the euro to a referendum now, he would lose. And that might be the end of him as well.

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