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The crisis: a reason to join the euro?

Is Britain running the risk of a sterling crisis by staying out of the euro? Or would it have been in an even bigger financial mess had it already joined?

By Willem Buiter   February 2009

YES: Willem Buiter

NO: Derek Scott

Dear Derek 11th January 2009

This year the euro celebrates its tenth anniversary. Since the global financial system is in tatters, the case for Britain going in is now stronger than ever.

Britain’s business cycle is synchronised closely enough with Europe’s that we look like a Frankfurt suburb. This suggests that “asymmetric shocks”—events like oil price hikes that might affect Britain differently from the rest of Europe—are unlikely to be a real problem in making the currency work. Yet, even if they were, flexible exchange rates wouldn’t actually help much.…

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