The Ostrich and the EMU
There has been intense debate in the UK over the European single currency, but the ratio of light to heat has been disappointingly low. Discussion has centred on whether the UK should join monetary union or not; barely any attention has been paid to the crucial issues of how economic policy must change if the UK is to participate, or how policy must adapt if the UK stays outside. And there has been little analysis of how the date of entry would be affected by the time it takes for policy changes to be implemented and take effect.
This report of an independent panel, chaired by Rupert Pennant-Rea, considers the policy implications for the UK of different strategies on membership of EMU:
(1) aiming to join in the first wave
(2) aiming to join later
(3) waiting to see how EMU works out
(4) deciding, in principle, not to join
The Panel considers these strategies with the following areas of public policy in mind:
(1) the conduct of monetary policy.
(2) the implications for fiscal policy.
(3) how institutions need to adapt.
(4) how the tax system should evolve.
(5) whether and how the transmission mechanism of monetary policy could be altered.
(6) the implications of EMU for financial supervision.
(7) debt management.
(8) the role of lender of last resort.
(9) implications for the labour market.
(10) international economic relations.
This is the first thorough assessment of the practical implications, rather than the desirability of EMU. In or out, the UK will be greatly affected by EMU and its policy machine must react. The plans and decisions to be made will have a long-term impact on the country�s economic interests. This report is a vital tool for those concerned with, or participating in, the economic and political debate; policy-makers, practitioners and academics alike.