EMU - considerations for British membership

Quarterly Bulletin 1996 Q2
Published on 01 June 1996

By Edward George, the Governor of the Bank of England.

The Governor of the Bank, Eddie George, discusses the economic aspects of the debate on European Monetary Union. He explains that while there are potential benefits from EMU undertaken in the right conditions, there are economic risks which could, if EMU goes wrong, become a serious source of political discord. The Governor notes that what matters fundamentally is not that convergence is achieved by a particular date, but that it is expected to be sustainable over the longer term. He questions the wisdom of moving ahead with EMU until there is more evidence of how unemployment is being addressed in different potential members. The Governor suggests that fears of competitive devaluation by the ‘outs’ are overstated. Looked at another way, opting out of EMU would not be a soft option.

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