Om Pandya, Columnist
Ideology: Conservative | Writing from: New York University

Just a few short years ago the debate raged on whether the United Kingdom should join the euro or stay with the pound sterling. The integrationists, the majority in government, pointed out that efficiency and cross-border investment would increase, and that the Eurozone would become an incredibly powerful player in the market if the UK joined. With increased reliance on inter-EC trade and less on the United States and Japan, it is hard to argue that they are right on that point. However, the British public disagreed vehemently and no further action has been taken.

Looking back at the debate and presently at the crisis facing the EU, it seems as if those who pushed for the independence of British currency have every right to gloat. The pound has fallen and risen in sync with the British economy – something that would not have been true with the euro, had it been adopted. It fell during the roughest of economic times, causing more manufacturing and exports, and is rising now while the British economy is recovering and the EU nations are still stuck in a recession.

Although they only had 0.1% growth this quarter, Britons can breath a sigh of relief when comparing what could have happened had they been on the euro. Without sovereignty over their currency the recession would have been far worse. If the euro had stayed strong while the economy was still in shambles then the recession would have rivaled the Great Depression. One only has to look at Greece and Spain to see the impossibility of tailoring interest rates without leaving at least a few nations out in the cold.

The instability right now in the Eurozone is a perfect example of a moral hazard. Greece, which has debt that is far higher than is permitted by the EU, is seeking a bailout from the other member states. If they do bail out Greece, it encourages other Eurozone members to run up debt with irresponsible fiscal policy and hope for a bailout. If they don’t they risk the euro plummeting, a domino effect that will spread to the rest of the EU, and ire from Portugal and Spain if they also do not receive a bailout.

The smart move might just be to kick Greece out. They are reducing the credit rating of every Eurozone nation, a situation the UK is lucky not to be in. Forcing them back to the drachma might seem heavy-handed but would send a message to the other nations to be stricter on fiscal policy.

Back when the UK was debating whether to join the euro or not, the economic rules for nations to follow were inflexible and enforced. Now however, these rules are bended for the benefit of many nations such as Greece, which was allowed to run its rampant budget deficit with no warning. Kicking Greece out would show the world that the EMU is sticking to the tough criteria that it was supposed to have and would put faith into the currency.

Despite all of the touted benefits of the euro, the stark reality is that most euro zone states have posted lower growth rates since they adopted the euro. The United Kingdom on the pound sterling has economically performed far better than the Eurozone nation, and the fear of fewer exports to EU nations has not been realized.

The next wave of EU nations that want to join the euro are Eastern European nations such as Slovakia, all of which are experiencing high growth recently. But in hindsight, staying away from the euro has been beneficial for the United Kingdom and the benefits of joining might be exaggerated. Especially with the global financial catastrophe, it is hard to really judge the benefits of the euro, but as of now we can safely say that the Euroskeptics were right, the United Kingdom was right not join the euro.