A debate that was thought to be over appears to have resurfaced due to the current climate of the finance market. Britain must again consider adopting the euro. When asked this Thursday, a group of economists commented that the British pound has become increasingly more vulnerable during the financial crisis affecting much of the western world.
'Countries that have a huge banking sector and a small currency - a currency that is not a global reserve currency - are vulnerable and at risk of being "Iceland-ised"' according to former Bank of England policy maker Willem Buiter. Buiter is at the forefront of a campaign to get the euro back on Britain's policy agenda.
Buiter further noted, "There's a real risk of a triple crisis hitting this country-a run on sterling, a sovereign default crisis and the banking crisis. It's a small risk, but it is an unnecessary risk that would be substantially diminished if this country had a real currency." The move toward the euro is unlikely to be drastic because policymakers at the Bank of England have shown little, to no desire to debate this single issue. Also, a significant majority of greater British public have shown opposition to a union with the 16 nations who have already adopted the euro.
Aside from the public, the Conservative party are even more vehemently opposed to the idea of further integrating Britain with Europe. This is a hot button issue, as the Conservatives could very well win the next election.
The pound's sharp decline in the last year has raised concerns that investors in the finance market may be losing confidence in the future strength of the pound. The pound has dropped about a quarter against the dollar, more than a third down against the yen, and is down 16 per cent against the Euro.
While chancellor in 1997, Prime Minister Gordon Brown set forth five tests for Britain to achieve full monetary and economic union with the euro area. The government assessed these tests in 2003, and judged the economic conditions were not ideal for integration at that time. One poses the question, however, if now is the right time for Britain to join the ranks of France, Germany and others who have made the switch to the euro.