LONDON — These are dark times, especially for Britain: The pound sterling is dropping like a stone; the huge British financial sector, a major part of the British economy, has shrunk dramatically; unemployment is rising; and the stock market is looking sicker by the day. Britain is now officially in recession (meaning that economic growth has fallen for two consecutive quarters).
Some can be heard urging that the pound should join the euro. That at least, so it is argued, would put some sort of floor underneath the British currency, as it heads down toward the humiliating rate of £1 per 1 euro and, some say, as low as £1 per $1, an exchange rate last seen 24 years ago. It was £1 per $2 as recently as a year ago.
Others argue that euro membership would be fatal. It would remove the flexibility to alter interest rates — in this case rapidly downward to almost Japanese levels in an attempt to shorten the recession — and it would remove the freedom to devalue, which ought in theory to help exporters and attract inward investors into cheap British assets and property, as well as tourists looking for an inexpensive U.K. holiday.