U.K. Jobless Rate Would Be Almost Double in Euro, CEBR Says
The U.K.’s unemployment rate would be almost double and its recession would have been deeper if Britain had joined the euro, according to the Centre for Economics and Business Research.
Gross domestic product would have contracted 7 percent last year and unemployment would currently be 15 percent if the nation had signed up to the single currency, CEBR’s Chief Executive Officer Douglas McWilliams said today in an e-mailed statement. The economy shrank 4.8 percent last year.
At 7.8 percent, the U.K. jobless rate is below that of the U.S. and the average of the euro region, which are both at 10 percent. Prime Minister Gordon Brown decided to keep Britain out of the European single currency when he was finance minister in 2003 after an assessment of the potential benefits of joining. Many euro members have struggled, McWilliams said personal business card.
“Most European economies have found keeping up with a German-inspired exchange rate a problem,” he said. “For those European countries that have a propensity to borrow, a single interest rate, kept low by frugal Germany, was a step too far and they over borrowed. Ireland and Spain are the most spectacular examples, but Portugal and Greece also had interest rates that were far too low for their economic circumstances.”
If the U.K. had joined the euro in 1998, economic growth would have been “slightly higher” and inflation would have been faster by about 0.6 percent through 2006, McWilliams said.