It would be 'strongly against Britain's economic interests to join EMU as it is constituted and planned', says Professor Patrick Minford in a detailed assessment of the Chancellor's five economic tests for joining. The Treasury is now carrying out these tests which, it has said, must be passed 'clearly and unambiguously'.
Professor Minford, of Cardiff University Business School, examines the arguments both for and against euro entry.
On the benefits side, he sees only small savings in transactions costs, offset by the substantial costs of changeover. The core of the argument of euro enthusiasts, says Minford, is that exchange rate risk against the euro would be eliminated. But, he points out, the euro is a regional (not a world) currency which has fluctuated considerably against the dollar: it is by no means certain that total exchange rate risk would be reduced by joining the euro and it might even increase.
As regards the costs of euro membership, the loss of interest-rate-setting powers is a serious matter, according to Minford. Within the euro zone, the variability of British output, employment and prices in response to shocks would probably