Letters to the editor

Polls and Comment

Library - an archive
of speeches

Economists Write

Bibliography of EMU

The Euroland Economy



Letters to the editor

24th December 2000

Dear Professor Minford,

On reading letters sent to you, I find most deal with Economic or Political issues. Do you have any opinions relating to the Pound as a symbol of all that Britain stands for, its values and its proud history.

I would greatly value your comments.

Kind regards.

Graham Gregson

Dear Mr. Gregson,

Thanks for your letter.

I take the point; the pound clearly does have all the symbolic value you say. I suppose the reason that euro-know does not dwell on this is that one might be inclined to give up a symbol on grounds of practical net benefits- we have seen our job as to help people evaluate those. But yes, it is indeed a powerful symbol so if you agree with us that giving it up is actually also costly in prcatical terms, then its symbolism too comes into its own,

yours sincerely,

Patrick Minford

Return to top

14 December 2000

On the 16th September 1992, the United Kingdom "crashed out" of the Exchange Rate Mechanism. Could a country "crash out" of the Euro in a similar way?

When two or more countries share a currency, what is the equivalent of exchange rate movements? The answer, surely, is cross-border flows of the currency. Take a two-country model for simplicity. A-land has a currency, the A, and B-land has an independent currency, the B. The A and the B float freely against each other on the foreign exchange market. Suppose that the A falls against the B. Goods and services, bought in A-land and paid for in As, become cheaper for people in B-land. Goods and services, bought in B-land and paid for in Bs, become dearer for people in A-land.

Now suppose that, other things being equal, A-land and B-land, instead, share a currency, the C. Cs flow out of A-land and into B-land. The quantity of money, in circulation in A-land, falls and, in the long run, prices and incomes fall. The quantity of money, in circulation in B-land, rises and, in the long run, prices and incomes rise. Goods and services, bought in A-land and paid for in Cs, become cheaper for people in B-land. Goods and services, bought in B-land and paid for in Cs, become dearer for people in A-land.

Therefore, a country "crashing out" of the Euro would be characterised by a catastrophic and unstoppable flow of Euros out of its territory and into the rest of Euroland. What is needed is some means of detecting cross-border flows of the Euros.

Richard Green

Dear Mr. Green,

The answer is that movements in prices are the equivalent; and yes if a country faces a slump in demand for its products then its prices will begin to slide, investment in plant and equipment will fall, people will emigrate, etc. Whether it leaves the single currency is then a political decision; the politicians, prompted by popular discontent, may decide that leaving the currency is desirable, as then they can cut interest rates and allow the exchange rate to fall. But if they do not then there is no monetary way people can 'get rid' of the country's money, euros, for the currency of another euro-country; it is the same stuff. The only thing they could do would be to sell euros for dollars etc.; but that would affect all euro countries, not this country alone.

There would simply be no point in taking money out of euro-country A accounts and putting it in euro-country B accounts; they are the same! This would only make any sense if country A
were to leave the euro- or were thought about to leave it. This last case may be what you have in mind: when there is widespread speculation that the country will leave and that certain of the currency held in that country would be swapped for 'liras' of 'francs' while euros held elsewhere would remain euros. Then indeed people try to get out of euros of the first sort into euros of the second- the currency outflow would quickly bring about departure from EMU, rather like us and the ERM.

Patrick Minford

15 December 2000

Thank you for your e-mail. What I have in mind is this.

If each of the two countries, A-land and B-land, has its own independent currency, the A and the B respectively, each currency circulates throughout the territory of each country but remains contained within it. The A is legal tender in A-land but not in B-land; The B is legal tender in B-land but not in A-land.

If, however, the two countries share a currency, the C, this will circulate throughout their combined territories. In the course of such circulation, Cs will be flowing backwards and forwards across the border between A-land and B-land all the time. Normally, these opposite flows will be equal so that there will be a dynamic equilibrium.

At any one time, X%, of all of Cs, will be circulating in A-land and Y% will be circulating in B-land, where X+Y = 100. If the opposite cross-border flows become unequal, X and Y will change. If X falls and Y rises, there will have been a net flow of Cs out of A-land and into B-land. It is such a net flow, I would suggest, that is the equivalent of the A falling against the B.

Richard Green


Yes, in a way you are right; the flows across borders of A to B of the common currency are the equivalent of the pressures driving A's currency down and B's up. But there is a difference; when A v B's currency exchange rate is floating then there is speculation on whether this movement will occur and it tends to force the exchange rate rapidly to what is justified by 'fundamentals'. When A and B share a single currency, C, this speculation will generally not occur because it will be assumed that the single currency will not be broken. In this case the flows into B will be offset by lending to A from B. Only when there is genuine fear that the single currency may collapse will you get speculation that could then reinforce the chances of collapse.

Put another way, the behaviour of these two systems differ because of the assumptions about how the monetary authorities will react. Under floating they are assumed to let the exchange rate move to protect their individual monetary policies; under a currency union they are generally assumed to support the union and subordinate their individual monetary interests. But if the markets suspect they may get fed up with this subordination then speculation similar to what happens under floating will occur.

yours sincerely,

Patrick Minford

27 December 2000

Thank you for that. Could I please ask about another aspect of the Euro?

To quote from a standard economics textbook:-

"Since banks have insufficient reserves to meet a simultaneous withdrawal of all their deposits, any hint of large withdrawals is likely to become a self-fulfilling prophesy as people scramble to get their money out before the banks go bust.

To avoid financial panics, it is necessary to ensure that people believe that banks can never get into trouble in the first place. There must be a guarantee that banks can get cash if they really need it. And there is only one institution that can manufacture cash in indefinite quantities: the central bank. The threat of financial panics can be avoided, or at least greatly diminished, if it is known that the Bank of England stands ready to act as a lender of last resort".

Is the same true of the European Central Bank? The Bank's web site is very hard to understand but I have not been able to find anything in it or in the Treaties to say that the Bank has such a function. If it is not the lender of last resort under the Eurosystem, then what is?

Richard Green

You have noticed an important gap in the ECB's armoury. It is not empowered to act as a lender of last resort. The idea is apparently that the individual central banks in each country will still be able to do so with respect to their own national banking systems; at least they are not forbidden from doing so. Yet it is quite unclear how they would print the necessary euros without the ECB's agreement; again the idea seems to be that the individual central bank, eg the Bundesbank, would lend to German banks as much as necessary to avoid panic, while the same amount of euros would be drained out of the euro area in other places. This would work in principle if the banking panic were localised as this assumes: that is some shock leads to local industries losing large amounts of money and bad loans for local banks. However if the banking panic went wider, across a large part of the euro area, it would obviously not be alleviated unless extra euros were printed in total.

Most people, myself included, think that in practice the ECB could act as a lender of last resort by simply declaring that monetary conditions were 'turbulent' and warranted particular actions such as the suspension of normal operating rules. But it is a new institution and noone really knows how it will operate in such as yet unknown conditions. The Fed made a complete mess of its first real crisis in 1929 and has never forgotten. We have to hope the ECB does not learn in a similarly hard way!

yours sincerely,

Patrick Minford

29 December 2000

Thank you for your e-mail of the 27th December. I had made the mistake of looking only at the Treaties and not at the numerous accretions to them. On this subject, Protocol (No. 18) on the Statute of the European System of Central Banks and of the European Central Bank provides:-

"18.1. In order to achieve the objectives of the ESCB and to carry out its tasks, the ECB and the national central banks may: operate in the financial markets by buying and selling outright (spot and forward) or under repurchase agreement and by lending or borrowing claims and marketable instruments, whether in Community or in non Community currencies, as well as precious metals; conduct credit operations with credit institutions and other market participants, with lending being based on adequate collateral.

18.2. The ECB shall establish general principles for open market and credit operations carried out by itself or the national central banks, including for the announcement of conditions under which they stand ready to enter into such transactions".

The second limb of 18.1 appears indeed to be referring to a "lender of last resort" function but, under 18.2, this is only exercisable under certain self-determined conditions. I assume (although I have not seen them) that the "general principles", under 18.2, are the "normal operating conditions" to which you refer and that these provide that the conditions, under which it stands ready to enter into such transactions, must be "turbulent".

One would have thought that the ECB should "stand ready" at all times to prevent turbulence occurring in the first place - not wait for turbulence to occur and only then stand ready.

Richard Green

Thanks. You have located a point of great sensitivity in the Treaty and its riders. On the one hand the authors wanted the ECB to be a hands-off anti-inflation instrument without any excuse for intervention that might create excess liquidity and on the other they were conscious of the possibility of 'turbulence'. The result is a paper treaty which might in principle lead to a failure to avoid a banking crash. In practice I think the ECB probably has enough authority to do wahtever is necessary, but it will depend on whether the Board has good sense or not,

Patrick Minford

Return to top

14 December 2000

3. Subject of the contract: The European Commission seeks to examine the feasibility of promoting improved corporate environmental performance throughout the European Union by investigating practical examples of the so-called factor-10 approach.

For the purpose of the study, the so-called factor-10 strategy is defined as a special approach to increase eco-efficiency, leading to a measurable and significant improvement of resource productivity. The efficiency factor-10 approach is defined as a reduction in resource consumption for any unit of production of physical products or services by 90%. To measure the improvement in efficiency, the period 1980-1985 will serve as the baseline.

Above direct copy Eurojournal 19/11/00 s228/147222 Tenders invited for study-Value 30,000 euro's

Resource consumption reduced from 100% to 10%.That's what it says!! Productivity increase by a factor of 10!!

Is this a misprint or have they gone loopy?


Dennis Puttick

Dear Mr. Puttick,

I presume it cannot be a misprint as it is repeated so often. The key thing seems to be the baseline date. If one takes 1980-85 as a baseline a 90% efficiency improvement is not so incredible. For example 11% improvement per year yields it after 20 years. This may be the answer to the apparent conundrum: it is about gains over quite a long time period. But
I agree that therefore it manages to be misleading because it seems to imply that this is both massive and yet feasible; it is feasible because it is not that massive.

yours sincerely,

Patrick Minford

Return to top

22 November 2000

Excellent site! Do you know where I can obtain material covering EU subsidies, how much they amount to and to whom they go?

Thanks very much

Nick Kropacek.

Many thanks. A source for EU subsidies (that is subsidies paid out by EU countries) is European Economy (no. 69, 1999): 1999 Review- issued by DG for Financial and Economic affairs; Table 69B, p.406. It is ISSN 0379-0991.

If you mean subsidies from the EU Budget, they go overwhelmingly to agriculture (though there is also the social fund and the regional fund which goes to poor countries and areas)- Eurostat has data on the EU budget and the OECD estimates the degree of protection annually in its reports on agricultural protection.

yours sincerely,

Patrick Minford

Return to top

22 November 2000

Dear Sir,

My name is Christiana Kannaourou, and I am currently working in the DG Budget of the European Commission. As I was asked to prepare a report about the change in the interest rate policy of the European Central Bank and what banks prefer, I would like to ask you some questions.I am sure that the answers that you will give me, will definately help me.

I would like to know, as from June 2000 the ECB has changed its interest rate policy into variable:

  • What reference rate for interest would you propose for deposits for which the due date is unknown, but, according to experience, will be as an average, more than a year?
  • How do you evaluate the ECB's new tender policy for its main refinancing operations
  • Which of the interest rates resulting from these operations do you find the most suitable one to be a reference rate?
  • Do you have proposals how to reduce the upward credit interest rate for a bank if the "marginal rate" is chosen?
  • If there is a cap to be introduces towards the minimum rate or towards the market rate, what would be a reasonable spread towards these rates?

I Look forward to receiving your reply by email.

Thank you in advance.

Yours sincerely,

Christiana Kannaourou

Dear Ms Kannaourou,

Many thanks for your questions. To be quite honest with you I cannot see the need for the ECB to do more than to intervene in the money markets with one very short-term instrument, as for example the Fed with Fed Funds rate.

Similar techniques are used by the Bank of England. owever, there are a wide variety of techniques with more or less identical effects- so probably it is of little consequence which of them is used.
yours sincerely,

Patrick Minford

Return to top

19 November 2000

As a proud Briton, I find the thought of our heritage, sovereignty, way of life,and freedom all being threatened ,as an act of political aggression by Europe and the government as an act of war. This political aggression must be stopped before it is too late. If my ancestors are prepared to lay down their lives against European aggressors, then I myself will do too. The British people must stop Blair NOW, before he sails down the river with Brussels, and with it, the British nation as a whole.

The very existence of European law being forced on an unonsulted people is an act of treason by the government for allowing such a crime to take place.

Our sovereign is Her Majesty Queen Elizabeth II and the parliament appointed by her for the people. Brussels has no right to impose such laws onto us , for we as a people have not agreed to hand in our freedoms to them. If the government allow such laws to be imposed onto a people who don't have a say on the matter, then this surely is a crime.

As seen in the Fuel crisis, peaceful demonstration will not work. The government does not care for the people, only their own egotistical careers . Direct action must be taken.If the French can get away with it, why not us? I am prepared to take arms if necessary to get back my right for MY sovereign and MY government to rule MY country on MY behalf. I will die if necessary to prevent a federal megalomaniacal regime that is Brussels, from dictating what THEY think is best for Britain.

Since Britain's existence we have always fought off European invaders, only this time it is not Longboats or Armada's or Panzers that threaten to invade us, but the invader is a political regime that borders on tyrannical and thrives on corruption. An ideal of "unity" where farmers and fisherman's lively hoods have already been threatened, where laws benefit the minorities and the majority.

This scourge of non democratic principles and nonsense laws should be fought with the same British will, bulldog spirit and determination that defeated the Spanish Armada, Napoleon Bonarparte, Kaiser Wilhelm II, Adolf Hitler and the forces of Communism. History is repeating itself. Europe once again threatens to conquer these great isles. They never have and they never will conquer us, for we never start a war, but we always finish them, and Europe is has just about declared war.

Steven Gellard

Dear Mr. Gellard,

I understand your point entirely. The problem is that it has been our democratically-elected governments that have signed the treaty commitments leading to this situation. Our traditions have given them the power to do this; only when some vital consitutional principle has seemed to be at stake do we have a referendum (as in 1975 over membership of the EEC and promised over the euro). There is an election coming up in which the two main parties have a different approach to this issue; if it seems that important to the British people presumably it will materially affect the result. Over to us all...

yours sincerely,

Patrick Minford

Return to top

7 November 2000

Dear Professor Minford,

A Euro Recovery

British exporters have been successful in euroland only by improving productivity and reducing margins, these very often have been subsidised by profits from elsewhere in the world.

In due course the euro can be expected to recover, particularly when the USA slows.... Would it be right to assume that the euroland manufacturers have been so softened up by the easy exchange rate that they will find the required regulatory and productivity improvements for the continued export of their goods much tougher to achieve than we did when the euro dropped?

Would it also be right to assume a higher value euro would encourage a flood of imports, to further damage these manufacturers?

Do you consider that the above could trigger a serious economic downturn throughout europe, sufficient in itself to test the whole concept of monetary union?

Yours sincerely,
Christopher H.M. Dowsett

Dear Mr. Dowsett, Yes, I think you have a point on this. If the euro rises, it will make life a lot tougher for continental exporters. The EU recovery will be slowed - indeed considering the huge scale of the euro's depreciation the EU recovery has not been very strong.

A serious slowdown would create strains in the euro-zone. However this would be met by a fall in interest rates which would help to offset it.

The question for the future of the euro is whether any such slowdown is fairly evenly spread or unevenly ('asymmetric'). If the latter then different countries would feel differently about the adequacy of the ECB's response - this could pose political problems for the euro, but one should not underestimate the determination of the politicians to continue with the project at all costs.

yours sincerely,
Patrick Minford

Return to top

31 October 2000


What do you have to say to those who's livelihoods have now been devestated with the lose of their jobs at Panasonic and Sony?



Dear Mr. Wilson,

I presume you mean that the falling euro has been the problem.

But had we joined it we would have a serious inflation problem like the Irish. That would have caused other, worse problems with the economy. As it is, the lost jobs at Panasonic and Sony would have gone anyway sooner or later, as our economy is changing its shape towards services and more sophisticated (skill-intensive) manufactures. Those who lost them will find other jobs, as we now have virtual full employment.

It's best this way, outside the euro, following our natural growth path and keeping control of our economy,

Patrick Minford
Return to top

29 October 2000


Thank you for so much information about the UK and the Euro. I am a Dutch student and for one of my courses at university I have to write a paper about why the UK does not want to join the Euro. I am looking for the formal arguments which have been used against the rest of the world by the Prime Minister or the Foreign Affairs Minister of why the UK does not want to join this project. The aim of our research is to understand what, besides the economic reasons, reasons the UK has implicitly and explicitly.

I hope you can help me, because there has been written so much, that it is not clear to me what is formally written or said about it or not. Preferably I look for the spooking arguments from the Prime Minister towards the rest of the EU, the clarification and then the exact words.

Thanks in advance,

Janneke van Maarle

Thanks. You can find speeches by UK politicians about the euro in our news update section. The No site contains latest stories; Eurofoundation do a digest of events; and Eurocritic has a magazine of articles and news. New Labour politicians take an overtly 'pro' position- though some (such as Mr. Brown) are currently against joining except possibly late in the next Parliament and some (e.g. Peter Shore) are totally opposed. Conservative politicians are against joining in the next Parliament, and most would be against joining in the foreseeable future and many against it at any time. I hope this helps you with your project.

Patrick Minford
Return to top

24 September 2000

I have just come across this website and have found it extremely interesting!

There are a few questions I would like to put to you, as I am currently studying all aspects of European Business and would be interested to find different ideas from a range of sources.

How do you think the developments in Eastern Europe could impact on UK business?

What are the advantages and disadvantages to UK business of enlargement of EU membership?

On these two questions, much depends on the terms for enlargement. The risk at present is that the EU will insist on heavy regulation as the price for entry- motivated by fear of competition from E. Europe. This would be bad for British consumers as it would remove an important source of competition in world markets; it would also inderectly be bad for British business as it would further strengthen the centralising and regulatory character of the EU.

What do you think the impact will be for UK business of EU directives on product specifications?

Again the tendency is to go for harmonisation which is raising the level of regulation indirectly - since harmonisation is generally upwards to the highest level.

Assess the opportunities to sell in an EU state for UK organisations? Thank you for taking time to read this e-mail, and if you can help in any way on anything it would be greatly appreciated.

Thanks again, and the information I have read so far has helped a great deal.


Romney Clayton

Basically, the point is that UK business and the UK economy benefit from a free market EU not from one of heavy regulation. The tendency at present is however towards centralisation and over-regulation, instead of towards the mutual recognition of country regulations with consequential competition between systems, tending to drive out excessively heavy-handed interference.

Patrick Minford
Return to top

16 September 2000

Dear Professor Minford,

I wrote to you once before via your 'Euro-know' site, from which I asked you a question about the EMU and your reply was of great help to me. I was wondering if you could possibly answer another few queries of mine. 
What is the current government stance with regard to its Economic Policy and objectives?
Also, what are the current problems facing the government in controlling the economy?
I would very grateful if you could answer me these questions.
Thanks very much!
yours sincerely Scott Hollins.

Dear Mr. Hollins,

These are two big questions.

On your first one, this government is confused in its objectives. Mr. Blair proclaims it is 'New' and committed to free markets as a way of helping all UK citizens to do well, including the poor. But Mr. Blair leaves execution to Mr. Brown who has enacted a large tax-and-spend programme, essentially Old Labour in nature. He has raised tax rates and introduced serious new distortions such as heavy stamp duty. He believes that extra public spending can address public service deficiencies; however this is wrong, as public services cannot, any more than nationalised food, efficiently deliver services required by modern consumers.

On your second, the main problem is that the 'new economy' requires a highly deregulated system akin to that of the USA. Unfortunately Labour has reintroduced new regulation, especially in the labour market, and this is likely to handicap progress in new economy areas, as well as in more traditional ones.

I have written quite extensively on these issues in my Daily Telegraph articles over the past three years - you can find them on my web-page (www.patrickminford.com).

Thanks for writing,

Patrick Minford
Return to top

7 September 2000

Can you explain to me why so many MPs and influential people are keeping quiet about the contents of the Treaty of Nice?. Are they keeping the Single Currency problem in high profile to draw attention away from the treaty?

Anne Palmer

It's a good point. Another euro-know reader has noticed and I have written in similar terms to him.

I agree the silence is peculiar- what is the reason? Both parties find the implications of the Nice agenda painful: Labour because it highlights the 'constitutional' aspects of our relationship with Europe that it constantly denies, Conservative because if implemented it would make a nonsense of 'in Europe, not run by Europe'.

As so often before, British politicians are hoping this latest embarrassing outbreak of European integrationism will go away. It may, of course; the Germans are now making awkward noises, and in any case the French are highly ambivalent towards integration (basically they only want the bits that suit them). Nice may collapse in meaningless assurances or even acrimony. If so both our parties will breathe a sigh of relief. If it does not, however, then all hell will break loose and our very membership in the EU will come onto the agenda.

It is genuinely hard at present to know which way European events will turn. Waiting and seeing is in these circumstances sensible- and that is, as you say, certainly what our politicians are doing.

yours sincerely,
Patrick Minford

Return to top

2 September 2000


Have you any explanation or just general thinking perhaps, about the almost complete UK national silence on the subject of the forthcoming IGC meeting in Nice in December, which, as I understand it, is a kind of "finale" in the Rome, Maastricht, Amsterdam treaty saga .

The proposed agenda was published on the European Parliament website in April and is there for anyone to see. It very clearly spells out the end of the UK as an independent, self-governing nation and yet government, opposition and most of the eurosceptic and europhile community have little to say and there have only been perhaps half a dozen press pieces in five months. Why? Does HMG intend to negotiate away all the "nasties" in the proposed agenda? One wonders how, since it will be outvoted 14 to one (or at best 11 to one) and the end of the veto is itself on the agenda!

My own view is that both Blair and Hague are absolutely mortified at the idea of having to broach this subject in public. I suspect there is a three line whip on anyone uttering a single word about it. I expect the government softening-up process for the Euro to be in gear shortly and of course we already have Mr Vaz's self-defeating opening shot which simply blames the Press for everything!

But Nice, surely, automatically implies Euro entry for the UK? Can there possibly be complete HMG silence right up to the date of the Nice meeting? Perhaps there can. I'd appreciate your views on it all and the likely turn of events between now and Christmas.

Geoffrey Charlish

Dear Mr. Charlish,

I take your point. I agree the silence is peculiar and it may well be for the reasons you give. Both parties find the implications of the Nice agenda painful: Labour because it highlights the 'constitutional' aspects of our relationship with Europe that it constantly denies, Conservative because if implemented it would make a nonsense of 'in Europe, not run by Europe'. As so often before, British politicians are hoping this latest embarrassing outbreak of European integrationism will go away. It may, of course; the Germans are now making awkward noises, and in any case the French are highly ambivalent towards integration (basically they only want the bits that suit them). Nice may collapse in meaningless assurances. If so both parties will breathe a sigh of relief.

If it does not, however, then all hell will break loose and our very membership in the EU will come onto the agenda. It is genuinely hard at present to know which way European events will turn. Waiting and seeing is in these circumstances sensible- and that is, as you say, certainly what our politicians are doing.

yours sincerely,

Patrick Minford
Return to top

30 August 2000

Dear Professor Minford

The scaremonger Trade Union and 'Elite' Business pro Euro lobby keep going on about the lost jobs if we do not join the Euro as though the whole of Europe will suddenly stop trading with us and not buy anything British at all!!

To counter this ridiculous argument, do figures exist, or could you tell me please:

  1. What proportion of EU GDP is spent on trade to the U.K.
  2. The proportion of the manufacturing companies pulling out of the U.K. that are relocating outside the EU? (i.e., to low wage regions)

Many thanks - John Roberts (Kenilworth)

Dear Mr. Roberts,

May I refer you to two web sites where you will find a lot on this point- www.euro-know.org (of which I am editor) and www.globalbritain.org?

Meanwhile the answer in general is that around 40% of our total trade (including 'invisibles' which are services and earnings from abroad, mainly of investment income) goes to the EU. Secondly, in a recent report the National Institute of Economic and Social Research (in a report commissioned by Britain in Europe) identified several million jobs as 'related' to this trade but at once conceded that they would not be affected except possibly in the short term by our ceasing membership of the EU. The point is that if we were to leave the EU without any sort of replacement trade agreement sectors that enjoy protection within the EU would face a fall in prices and would contract; but other sectors would expand to take their place by the usual pressures of market forces. Overall, calculations based on the cost of protection to us of the EU (in the CAP and also in the protection of manufacturing) suggest that our living standards are around 1.5% lower as a result of it. The NIESR worried that inward investment would fall - it would in the sectors being protected by the EU but it would rise in the others (software, the City, etc) where expansion would take place.

yours sincerely,
Patrick Minford
Return to top

06 September 2000

Dear Professor Minford

Thank you very much for your interesting reply to my questions. A couple of points if I may. Firstly, you say 40% of our total export trade goes to the EU whilst I know that the 'Pro' lobby say it is about 60%! Frankly, who do you really think is correct, or is it just going to remain one of those political points of conjecture to suit either side? Secondly, even bearing in mind your comments on the NIESR etc, with question 1) of my original E mail, what I was trying to ask was: what is the level of EU exports TO the UK - are there any figures? - my point being that EU countries must value our market as much as we value theirs, and, whilst market forces will ultimately decide, it is a fatuous comment to say that we will be isolated and the EU will simply not buy our goods and services (and presumably we will not buy theirs) if we do not join the Euro, because that is how wars used to start!

I hope you see what I'm getting at - it's just nice to have 'layman' type facts at one's disposal during discussions or arguments with 'Jo Public' (people like me in other words), who will be the ones anyway to decide to join or not to join, if we can get them all out to vote that is!

Thank you again for your help and please forgive me if the information exists on the web sites you gave me, as I have only lazily scanned through them to date!

Yours sincerely - John Roberts

Dear Mr. Roberts,

Thanks. The answer about the 60% is it is a (somewhat exaggerated) estimate of the EU share of our trade in goods only. Also adjustment needs to be made for the Rotterdam effect (as much trade for non-EU goes through Rotterdam in the crude figures).

I am not sure about the share of EU exports to the UK- I would guess about 15% of goods and a bit higher of total. But I am forwarding this to Ian Milne of Global Britain in the hope that he will both tell you more about the above as well as this EU side of things.

yours sincerely,

Patrick Minford
Return to top

25 September 2000

Dear Mr Roberts,

You put a number of trade related questions to Professor Minford, most of which we (in Global Britain / eurofacts) have been examining in detail for some time (and writing about in eurofacts).

First of all, the proportion of our global trade going to the EU. As Professor Minford said, for goods alone, it is indeed almost 60%: in 1999, it was 58.7%. But exports of goods are less than half (46% in 1999) of our total exports, which comprise also services and receipts of investment income. All in, less than half (49% in 1999, and that was an unusually high year) of our total exports ("credits on current account" in the jargon) go to the EU.

But these recorded proportions going to the EU are overstated, for two separate reasons. One, baptised by us the "Rotterdam-Antwerp Effect" is the over-estimation of exports actually being consumed in Holland and Belgium and therefore the EU, because of exports which merely transit via Rotterdam and Antwerp on their way to countries outside the EU, but which are recorded as exports to Holland and Belgium.

The other distortion we call the "Netherlands Distortion" and this is to do with the channelling by multinationals of capital investment and dividends through brass-plate Dutch holding companies for tax reasons. Again, this distortion overestimates the amount of investment income arising in the EU.

Once you "aim-off" for these two separate distortions, you can guess – no more than that – that the real proportion of our global exports going to the EU is no more than 40%.

Comparing total UK exports to the EU to UK GDP, the recorded proportion (1999) is 18½%. Once you aim off for the distortions described above, the proportion drops. My guess is that roughly one-tenth of UK GDP is involved in exports to the EU. The Blair Government itself estimate that 3 million UK jobs are involved in exporting to the EU: that works out at 1 British job in ten, more or less.

Your point about how much the EU exports to the UK: for the other 14 EU countries we are their biggest single export market in the world, bigger even than the USA (ecu 252 billion in 1998, v ecu 241 billion to the US). Plus they have a built-in trade surplus with us (£44 bn on goods and services cumulatively over 1997-1999). Are they going to cut themselves off from the UK once we withdraw? Pull the other one.

I hope this helps.

Best wishes.

Ian Milne, Director, Global Britain
Return to top

24 August 2000

Dear Professor Minford

I heard your most interesting interview on Ireland’s Radio 1 last week, in which the Irish economy and in particular its inflation rate were the main subjects of discussion.

Having worked in Britain during the eighties and thus witnessed first hand the development of the recession in the latter half of that decade, I now wonder if the storm clouds are not gathering here in Ireland for a recession of even greater intensity and duration.

Money seems to have lost its traditional value and in particular the cost of land and housing is increasing at an alarming rate – orders of magnitude more than official inflation figures. The labour market is extremely tight. Building costs are accelerating rapidly. Cost over-runs are occurring on projects.

There are, however, those who propose that whereas the business cycle still applies, this economy will continue to grow very strongly for much longer still. This is primarily because inward investment is at an extremely high level and shows no sign of abating. As a result, huge numbers of new jobs are being created.

Your view on this proposition would be most welcome.

Yours faithfully

John Fitzgerald

Dear Mr. Fitzgerald,

Many thanks. I wrote again on this in Monday's Telegraph (q.v. or lese you will find it on euro-know in the usual place).

Basically, this is a non-trivial problem. Inflation is a wrencher-apart of societies; the politicians will have to react and when they do it will be uncomfortable. Even if they do not, the process of 'sweating it out' will not be pleasant and will likely lead to a temporary bust.

Having said all that, the fundamentals of the supply-side favour continued strong growth. These are demand side problems- but they will very likely cause a serious interruption in growth.

yours sincerely,
Patrick Minford
Return to top

12 August 2000

Dear Sir

I want to know how we can stop companies such as Toyota and Nissan for example, using FEAR of job losses as a method of influencing a gullible public(when the chips are down that is!) I am deeply concerned that the Referendum when it comes will be influenced by the Multi-Nationals and big Businesses with threats to jobs and investment withdrawel. We must stop the other EU member states interfering in our decision as well, this is a UK affair and they must stay out of it.

The UK population are in general against the Euro but I do not think their thinking is sufficiently deep to ensure that they will vote in sufficient numbers and vote against, especially if the Government say they should.

What assurance have we that the Government, if the Euro is rejected, will not have another Referendum later? I think they will!

On the other hand, if there was to be a majority in favour, would that also allow us to have another one later? I think not!

What level of majority will be required to pass the legislation, if it is a close call then do we not run the risk of civil strife? There are groups who are prepared to create "mayhem" if the majority is only marginal and that does worry me.

I think the vote should be compulsary and at least 66% should be the finishing post.

Name and Address Supplied

What you are saying is clearly a big worry. The only way forward is to keep up the popular pressure to keep the pound and make the politicians realise that on this one the people will on no account let them get away with sly manipulation. The next election will be important; this government hopes to win it by pretending it has no necessary intention of ditching the pound whereas the truth is the opposite. Only one political party at present has both the will and the capacity to keep the pound- that is the Tory party (some others have the will but not the capacity); the most probable way therefore to keep the pound is to vote for that party. Having done so however the pressure will still need to be kept up as we have seen how governments can be seduced once in office.
yours sincerely,
Patrick Minford
Return to top

5 July 2000
Dear Professor:

Many people say that they feel that they don't know the facts about the Euro to make an informed decision. The following facts come from the OECD.

Given the UK has:

  • Only an average EU income (EU/UK =100) (and considerably less if one excludes the South East, South Yorkshire, Cornwall >75 for example)
  • Above average cost of living
  • Below average life expectancy
  • 3rd Lowest percentage of population in post 16 education
  • longest work week in Europe
  • shortest holiday entitlement
  • 34% higher winter death rate among pensioners than Germany
  • highest number of primary students per teacher
  • least spent on public transportation per capita
etc., etc...

how on earth could things get worse if we joined the Euro?


Nick Grealy

Dear Mr. Grealy,

The point is: what is the EFFECT of joining the euro? The list of facts you mention - or indeed many others one could mention that paint the UK in a better light - are only relevant in so far as they are a consequence of having or not having the euro. Given that this has been in existence for some year and a half, and economic consequences come with long lags, it is unlikely they are relevant.

That is why on euro-know we go on at some length about what seem to us to be the relevant arguments about the consequences of joining. You will notice we do not say things like: France is richer/poorer therefore join/do not join the euro. We might as well say Switzerland is far richer than the UK so let's join the Swiss Franc.

You may well reply: these are complicated matters that the British public will not understand or wish to be bothered with. But I have always taken the view that in its bluff way British public opinion is one of the most sophisticated in the world in terms of knowing how to decide on complicated issues (perhaps rather like a brilliant chief executive who is no technician). Therefore we persist in trying to explain these matters in a serious way.

Thank you for writing,

Patrick Minford

Return to top