Prospects for the eurozone

Financial Times
January 2, 2012

Question 2: How many currencies will exist in the area now called the eurozone by the end of 2012? How effectively can the UK insulate itself from the eurozone?

Samuel Brittan, Financial Times: At a guess two or three. Britain can’t insulate itself. Banks which ask for help should be nationalised.

At a guess two or three. Britain can’t insulate itself. Banks which ask for help should be nationalised.

Philip Booth, Institute of Economic Affairs:

My best guess is “one” (with odds of less than 0.5). Coming in with slightly lower odds is an answer of “two”. If there are two then there is a roughly equal probability of the two currencies being two forms of the euro (north and south) and the two currencies being the euro and the drachma. It is becoming increasingly difficult for the UK to insulate itself from the euro because the EU is creeping increasingly towards a trade-distorting regulated market and away from a free trade community of nations. A separate currency is the best insulation we have and there is not an awful lot more that can be done. Obvious approaches such as requiring the banks to hold more capital against the risks bring with them their own risks (of economic slowdown through reduced bank lending).

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