Viewpoint - All Hail The Euro

Dec. 21, 2004
Europe needs monetary union, despite what the British say.

My hotel bill in Milan came to 227,000 lire. The taxi to the airport cost 25 Irish pounds. The charge for parking overnight in Belfast was 16 pounds Sterling. A reasonably good bottle of wine in Paris -- a gift for my very patient mother-in-law -- set me back 23 francs. A big chunk of Manchego cheese ran me 800 pesetas in a Barcelona supermarket. You think I'm ready for the euro? In theory, the single European currency exists right now, since all the monetary units of the euro zone have been locked together since Jan. 1 last year. But in practice, Americans who travel through Europe still have to be pretty adept at multiplication and division if they want to have any idea of what they're spending. In Italy, you divide by roughly 2,000. In Ireland, multiply by 1.3. Think six francs or 175 pesetas to the dollar if you're headed to France or Spain. For German marks, divide your restaurant bill in half and you'll know what the meal cost you in U.S. currency. Then again, maybe the rates have changed since I last checked. You think I'm ready for the euro? When I got back from Italy last month, I was carrying about $30 in lire, $15 in Sterling and another $45 or so in Irish punts. Because bureau de change is French for "place where travelers are robbed," I hold on to my foreign currency rather than pay 4% to 6% for the privilege of converting it back to something I can use on a daily basis. In my office there are envelopes devoted to British, Czech, French, German, Italian, Spanish, and Swiss currencies. I'll add one for Belgian money before the summer's over. You think I'm ready for the euro? In 2002 the euro will become a reality for people like me, so money I get from a bank machine in Madrid will be just as useful in Milan or Mannheim. Coke machines in most European cities will no longer require me to perform complex mathematical equations. I'll even be ready to get rid of most of those envelopes in my office. Am I ever ready for the euro. Not having to keep track of all these currencies will make my life infinitely simpler, and I'm just a journalist who has to travel a lot. Still, I'm absolutely salivating at the prospect of Jan. 1, 2002. Which makes it all the more strange to me that Britain still has no plan -- firm or otherwise -- for joining up with the rest of its European partners in economic and monetary union. In recent months, the strength of the British pound against the euro has absolutely devastated UK manufacturers. Top auto-industry executives have issued bleak warnings that Britain's once-mighty automotive sector will be a museum piece if something doesn't change soon. Executives in other sectors from other European companies look puzzled whenever the issue is brought up. You can almost hear them thinking, "What is wrong with the British?" What's wrong is simple: nationalism. Britons are devoted to the pound because it's part and parcel of Britannia, ruler of the waves. It's the H.M.S. Victory and Nelson's great triumph at Trafalgar. It's the Queen Mum and the changing of the guard at Buckingham Palace. It's warm beer and overcooked beef. No matter how much sense joining the single currency might make economically, it could take the equivalent of another world war for that step to be acceptable to the British public. After all, it took the cataclysm of World War II to make the British public understand that it couldn't afford the empire anymore. The weakness of the euro has seemed to buttress the argument that Britain should remain aloof from the single currency. When the European currency really tanked earlier this year, there was delight in the euroskeptic camp. Opposition leader William Hague -- a singularly uncharismatic politician who can't win any popularity no matter how much he panders -- all but did a victory lap through the House of Commons. See, the euro haters were saying, it was a bad idea the whole time. Experts seem united in the belief that the euro will regain much of the ground it's lost and will do so before too much longer. Until it does, though, British manufacturers doing business on the Continent are losing sales because their products simply cost too much right now. But even after a euro recovery, even after there's a more sensible rate for the pound, purchasing managers across Europe will have to factor in the cost of exchanging currencies if they want to buy British products. And they'll have to worry that fluctuations in the exchange rate could cost them vast amounts of money. If I'm buying components for an automobile assembly plant in Germany or France, that might just be enough to make me choose the supplier in Barcelona over the one in Birmingham. Still, opinion polls show that Britons just aren't ready for the euro. Here's hoping this isn't the sort of miscalculation that led to two world wars -- and their disastrous effects on Britain. Tom Mudd is IndustryWeek's European bureau chief. He is based in Dublin.

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