Single currency: It's all a question of timing

Ignore the rhetoric of the Euro-philiacs and the Euro-hysterics - as the two camps have been aptly renamed - and it becomes clear that a pragmatic consensus about British membership of the single currency is emerging. Eddie George, Governor of the Bank of England, expressed this tendency yesterday. Shadow chancellor Gordon Brown did so in a speech in Bonn the day before.

It seems an entirely common-sense view. Joining EMU obviously has pros and cons; whether or not it is the best thing for the British economy will depend on circumstances at the time. To Euro-sceptics, this is simply avoiding the issue: if the single currency is bad for Britain at some points in time then it is wrong in principle.

This is misguided. Timing is always of the essence in economic policy decisions. There is a clear example of this in the botched decision to join the exchange rate mechanism. If Britain had joined when it was first proposed by the then chancellor Nigel Lawson, it would have joined a far more flexible system, and would have been able to influence the evolution of the system. Over the next three years the ERM became far less flexible. For a major currency like sterling to join at that point was, in retrospect, a disaster waiting to happen.

Similar arguments apply to the single currency. Joining three or five years after the core group will not be an equivalent decision to joining from the outset. Although there would still be a cost-benefit analysis to be made, the shape of the system would have been fixed already. By taking part in the formation of the euro, Britain would have a role in shaping it and ensuring that the criteria for its sustainability were met.