Sunday, 15 May 2011

Eurozone growth

Earlier this year i wrote on essay in which i ferociously condemned any pleas for the UK to join the Eurozone. The basis of my argument was formed on the idea that we would lose control of our monetary policy and this would lead to longer recessions, slower growth and periods of high inflation. However, it appears that i may have been a little too quick to banish the euro. Figures released recently show that the eurozone grew by 0.8% in the first quarter of this year, up from 0.3% on the last 3 months of last year. Even debt-ridden Greece experienced growth of 0.8%. Not only was this growth unexpected but it comes at a time when the UK economy has had its own growth forecasts downgraded as inflation is set to rise close to 5%, 3 percentage points above the target level. The growth of the eurozone was for the most part, due to the economies of Germany and France prospering, with respective growths of 1.5% and 1%. Obviously, the efficiency of these two economies has led to an increase in their competitiveness which has increased the volume of exported goods and services. I am still not for the UK to join the Euro, i feel that losing our sovereignty and the various menu costs of converting would harm our economy. However, it does beg the question, if we are not using our monetary policy to control inflation, then why not join the euro and at least benefit from this accelerated growth?

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