Should Britain now join the euro?

The euro is flying high and the ECB is a credible central bank. Meanwhile the UK's economy has hit the skids and sterling has slumped. So, is now the time for Britain to join the euro?

The pessimists warning of a short-lived, or chronically weak, single currency at the European Central Bank's inception in June 1998 have so far been "spectacularly wrong", as Edward Hadas notes on Breakingviews. The ECB has established itself as a credible central bank, with the euro flying high against its major rivals; eurozone inflation is lower than in the previous decade and the euro accounts for 27% of global forex reserves.

Meanwhile, sterling has slumped as the British economy has hit the skids, and, as Lex points out in the FT, sterling is now worth the equivalent of 2.44 deutschmarks, 16% below the ERM entry level "a competitive rate to lock in for exporters". Consumer prices over the past year and growth rates since 2004 have been similar to the eurozone's, suggesting Britain has been converging with the eurozone. Given all this, the question of Britain joining the euro has re-emerged.

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