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Letters to the editor

14 June 2001

Dear Professor,

With few exceptions, there is always a one-to-one correspondence between the set of all single currencies and the set of all sovereign states. Two or more currencies do not co-exist within a single sovereign state, nor do two or more sovereign states share a single currency.

There must, surely, be a theory that explains this very strong tendency. It would be nice if such theory could show that, in general, this has to be the case; that the initial condition, of a forced sharing of a single currency by two or more sovereign states, must, over time, lead to either:-

  1. The coalescence of sovereignty; or

  2. The separation of the currency; or

  3. The collapse of the currency.

I would appreciate your views.


Richard Green

Dear Mr. Green,

An interesting issue - and well, yes and no!

There are examples of two or more currencies circulating in one sovereign state. Israel, Argentina, indeed much of Latin America, Russia and quite a few ex-Soviet states. The second (sometimes the first) currency is the dollar in these cases which are generally marked by the instability of the official home currency.

Examples of two or more states sharing one currency also exist. There was the Latin Monetary Union of the last century; several German currency unions before the Bismarckian unification. But much of history saw the use of gold and silver by all sovereign states (even if there was tampering with the value of the coins issued); and under the Gold Standard proper between 1870 and 1914 there were rules about how participating states should back their home-issued currencies with gold holdings in the central bank's vaults. More recently many colonial territories use the mother country currency.

The relations between money and politics are not written in stone; but you are right that there are strong tendencies for paper ('fiat') money to be taken over by sovereign states. The basic reason is that only a sovereign state can give paper money the necessary guarantee. Nevertheless this does not imply that a group of sovereign states could not join up to guarantee a shared money. It only suggests that they must have an uncommon degree of political cohesion to be able to do this credibly for a long period of time, given the possible strains that may arise. Thus the examples in the last paragraph all collapsed after some time.

In the case of the euro the issue of its survival really boils down to whether the states involved have the necessary political commitment to the euro to put up with the discomfort from being unable to deal separately (through their own interest and exchange rate changes) with shocks hitting their economies. It is possible that there will also be other irritants such as 'harmonisation', pension-sharing questions, and political sovereignty demands.

Yours sincerely,

Patrick Minford

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9 June 2001

Dear Professor Minford

Is a member state of the European Union allowed to declare its "independence" by withdrawing from the EU through a referendum or an act of parliament?

I believe there will come a time when at least three existing member states will decare their independence from the European Union to safeguard their independence and prosperity. There is absolutely no need for this country to be in the EU any longer. It is expensive and surely tax-payers money could be spent on improving health, education and transport.

With free trade becoming a reality, the EU as an insistution is becoming redundant year after year. The EU does not have an "army" to stop individual member states from withdrawing as they are sovereign.

Yours sincerely

Eric Rohloff

Dear Mr. Rohloff,

There is nothing in the Rome Treaty dealing with leaving it. But the point is that being a Treaty any country can de-ratify from it using its own laws. For example in the UK we merely need to repeal the Act that gave precedence to EU laws.

As for the pros and cons of being in the EU that is a matter that will no doubt inceasingly be debated in the context of world free trade and the direction the EU itself takes. There are a number of elements in that balance sheet that are still hard to estimate- eg what exactly is going to happen to EU services trade.

yours sincerely,

Patrick Minford

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14 May 2001

Dear Sir,

I really enjoyed reading your web-site and am looking for some help to the following question: it can be said that the process of european integration has been consistently hampered by EU members reluctance to pool their individual national sovereignty into a genuinely accountable form of eu wide sovereignty, I have found sufficent info on the euro but would appreciate some info on problems that individuals countries have with the sem, competition policy and social policy.

many thanks

Ross Qualters

Dear Mr. Qualters,

This is a big issue. I cannot possibly give you an adequate answer. The point is that European integration is not seen as the appropriate objective by many countries, certainly not by the UK. The Treaty of Rome was about trade essentially; when the UK joined it did not accept that it was in order to become a part of an EU state, but rather to further closer trade links. When the UK signed up to the Single Market, it did so expecting it to lead to greater freedom of competition within the EU's borders. And so on.

Some countries feel more eager to integrate - notably the smaller ones such as Belgium and Austria. However, even they still resent interference from the EU - as in the Haider affair.

I am sure there are many other websites with a great deal of information on these matters - perhaps the Britannica site for instance. You could also consult the national sites of countries like Sweden and Denmark that share UK opposition to an EU state.

yours sincerely,

Patrick Minford

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15 February 2001

Dear Mr. Minford:

I too understood that Tony Blair attended at least one meeting of the Bilderburg Group. In fact, in writing to him in about 1998 I charged him with it and received no denial, just that my remarks had been noted. He was in no way bound to reply at all of course, but I trust at least that the British taxpayer did not foot any part of the bill...

On the other hand, I would deny individuals holding posts in public office at around national level the right to attend secret meetings. If they do, the public has every right to object, and to receive both an apology AND the fullest explanation of what went on! Given their marked propensity for messing-up, politicians have no right to decide what they may disclose.

Again: a glimpse of the names-of-power that have been 'Bilderburgers', and I for one, shudder, at the Goldfinger scenario they suggest.

Regarding the proportions of British opposition to the Euro - which is increasing daily - our concern should be, how it should be directed. To rid us of it, can we trust any of the parties that have, together, brought us to the brink of this common-currency nonsense? Surely not! Remember; assumption of the Euro is just a finishing touch. Its adoption would be surely followed by political union with the EU that has pressed-on, unrelenting: there is much Brussels-inspired beaurocracy already in-place to be undone. We must claw-back that which has been surrendered in order to give ourselves the security of a British Constitution again, firm this time: written laws that prevent any government giving-up anything without OUR say-so. Ministers and MP's must make a formally-signed declaration to this effect, on automatic penalty of seat-forfeiture and imprisonment.

If we are to partner Europe, we need solidly-British MP's to represent us from a securely British platform. They have a long-term mission to accomplish, and they must be free of old entanglements to do it. Surely, there are enough honest independents amongst us! Another thing: if they come forward, they'll give our votes some meaning again!


D. Thomas.

Dear Mr. Thomas,

Thanks for your letter.

I still think anyone has a right to go to any meetings they choose, open or secret. There is such a thing as privacy!

On the election and representatives, there is no question that the best hope for those who oppose the forced march of European integration of this country is the Conservative party. I agree it has made a lot of mistakes before. But its position now is the most reassuring of the three major parties- bitter experience shows that minor parties can at best only succed in wounding one of the big three (as did the Referendum Party to the Tories last time).

yours sincerely,

Patrick Minford

Dear Mr. Minford:

It seems that I must labour a point or two:

  1. PRIVACY? Bilderburg meetings don't invite 'anyone'. Invitees qualify by the degree of their political station. This is the dichotomy: invited because of the power WE invested in them, to a meeting of politicians with similar outlook ... it's a fair assumption that such ducks will behave like ducks - how is it possible to regard them as 'private' individuals?
  2. A Party that surrenders more to Europe than any other, having first been responsible for the circumventing of our Constitution, ignores its own prophets (Geoffrey Ripon), misleading us all along, now presents itself as the main hope of Euro-sceptics ...well some of it does: (listen to Ken Clarke). Somehow I find that doubt comes easily.
  3. I find that your faith in political parties finds no echo in my breast. ' Wounding' the the big three to the point of killing them off would do this country the world of good. The votes of its citizens would achieve some weight again, and hopefully we'd have MP's to do as WE say.

Sincerely, D. Thomas.

Thanks! I don't think we are going to converge on this one!

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11 February 2001

Dear Sir

Leaving aside the focus on purely economic matters for just a moment and focussing on wider issues, I have never seen any debate at all on the question of the constitutional and legal propriety of a referendum on Europe.

Since any particular government is only LENT the powers it enjoys (or doesn't enjoy, depending on the scandals of the day etc...) and also since no government is traditionally supposed to be able to bind its successors, how can it possibly ever be right for this or any government to surrender the sovereignty it holds on trust for ALL the people on the say-so of some of them???

If I gave away something that I only held on trust for someone else I would expect a visit from the police!!!

Any answers??

Yours faithfully

John Coxall

Dear Mr. Coxall,

It is a problem. However if you think about any decision affecting future generations the same problem arises. The answer must be that those living today have to take the decision. Generally it is done via Parliamentary representatives with delegated power. On momentous constitutional issues Parliament asks to be advised via a referendum; in principle this referendum is not binding constitutionally, that is our system remains one of Parliamentary government.

It may not be the best system. In Switzerland each canton has to have a referendum on many routine issues and on constitutional issues like joining the EU there is a binding national referendum.

But for better or worse it is the one we have had for hundreds of years and people therefore generally accept it- since in practice we have to have some system, this implies there is no real alternative,

yours sincerely,

Patrick Minford

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6 January 2001

Dear Professor Minford

I've read speculation that the whole euro project could be abandoned even after euro notes & coins have been intoduced and computers etc adapted to take the new currency.

Is this really possible that billions of euro notes and coins will have to be destroyed and millions of computer terminals re-converted to the old currencies?

Will Ireland leave the euro zone bearing in mind all the work that has gone into preparations for "e-day" on 1 January 2002?

What are the chances of seeing a return to the old currencies (eg. French Francs, Liras, Marks, Guilders, Escudos) in my lifetime?

I look forward to your reply

Eric Rohloff

Dear Mr. Rohloff,

In this currency business all things are possible. Countries (look at the ex-Soviet Union) can decide to jettison currencies and replace them with new currencies if they wish; they are sovereign. In the euro-area all 12 countries are sovereign and can so decide. Of course there would be costs, of annoyance etc to partner countries with the possibility that one might have to leave the EU as there is no provision for such behaviour in the Rome Treaty and its successors. However in practice it is quite unlikely that a country suspending the euro would be forced to leave the EU.

So assessing the likelihood of what you suggest is difficult. If times are normal- that is, no large shocks hit the 12 economies with widely differential effects-, it is highly unlikely because the political costs would exceed any benefits of regaining control of one's economy. However a severe shock which left one or two countries greatly at odds with the interest rate policy of the ECB, say facing high unemployment and falling output, would be a different matter. Democratic politics being what it is, public opinion could in such countries turn against the euro and force the politicians, like it or not, to leave the euro to survive.

yours sincerely,

Patrick Minford

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5 January 2001

Dear Professor Minford

I have followed with much interest the debate on your internet pages and it is heart-warming to read of so many like minded people.

One issue which continues to dominate the arguments of those in favour of economic and monetary union is the impact it would have on trade following the abolition of exchange rate fluctuations and transaction costs.

Can you confirm, to bolster my arguments, that the currencies which UK companies trading overseas use if they are not using Sterling, is the US dollar which accounts for some 88% of the non Sterling account. This is very different from where we trade and much more important, for if my figure is correct then adopting the euro would have at best a minimal impact on trade.

Can you confirm what currencies UK companies trade in.

Many thanks and I look forward to hearing from you.

Best wishes for 2001

Jonathan Mackie

Dear Mr. Mackie,

Thank you for your kind letter.

As far as we know a great deal of our trade is invoiced in dollars but the truth is it is a red herring in the argument about the euro. What matters is the currency in which our exports are sold in the shops of their ultimate destination; and that in which the suppliers of our imports have their costs. The reason is that the difficulties (variability) affecting traders comes from the varaition between sterling costs and prices and those in the currency of foreign suppliers and customers. The invoice currency is just a vehicle for expressing the traded price. For example suppose a UK radio is exported to Japan; if the sterling rate rises against the yen, then the exporter has an unpleasant choice- either to hold prices in yen and take a loss in sterling, or to raise prices in yen, keep the same sterling profit per radio, but lose Japanese customers. This is so whether the radio is paid for in dollars, yen or sterling.

But you are still right that the extent of our trade with the euro area is often exaggerated and that with the dollar area underestimated. Estimates by Global Britain (whose site you can visit) suggest that of our total trade in goods, services and other 'invisibles' (such as returns on overseas investments), around 40% is with the euro area. Since most of the rest of the world is tied closely to the dollar, this implies that most of the rest of our trade is with the dollar area.

yours sincerely,

Patrick Minford

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