Sunday, August 10, 2003
Should Britain join the Euro?
Today’s Sunday Times highlights the problems in Europe and compares the EU with other economic areas.
The economic importance of India is expected to overtake China and in our part of the world Germany, Italy and Spain are expected to shrink in importance relative to Britain and France.
Demographic trends and growth rates are different for different parts of the world and they change very slowly. Europe’s trends do not look good.
The American birth rate is more than two per woman while in Spain, Italy and Greece it is now 1.1. Immigration is not expected to help this. The American population is expected to rise by 150 million by 2050 of which 50 million will be immigrants whereas Europe’s population will increase by only 30 million immigrants. At present Europe’s population is more than 100 million greater than America’s but will be the same in 2040 and less by 40 million in 2050.
If Europe was to increase immigration by a large amount the immigrants would probably come from North Africa and the Middle East which have excess youthful populations and this could cause much friction in the EU.
Economic implications follow the demographic trends. A country’s long-term growth rate is determined by the increase in its working population and the rise in productivity.
However, the working populations of Britain and France will not fall at all, whereas those of Germany, Italy and Spain are forecast to drop by as much as a third in the coming decades.
As a result, the European Commission calculates that the US economy will grow twice as fast as Europe for decades to come – averaging 2.5% a year compared with less than 1.5% a year in Europe.
Analyses by the United Nations, the World Bank and the European Commission all come to similar conclusions.
The American economy is currently about 20% bigger than the EU, but by the middle of this century it will be two-and-a-half times the size.
Other signs are against the EU. R&D spending is lower in Europe than America, and strong unions, muted competition and extensive regulation conspire against rapid change.
Do we want to be associated irretrievably with a failing economic area?
Britain has always had much more in common with the US, both politically and in business methods, although the Labour Party seems to be edging towards European style interference and regulation.
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Another hot day and record temperatures for Britain were achieved today, first at Heathrow airport of 100.2 °F or 37.9 °C, then at Gravesend 100.6 °F or 38.1°C.
