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		Britain: An Atlantic economy, not a European economy Lincolnshire Echo - October 16 2002 In the debate about the euro, a key question is whether our economy has "converged" with euro-land. People often talk loosely about convergence without being at all clear what they mean. Does convergence mean that our interest rates are about the same? Economies are cyclical. Interest rates go up and down. Sooner or later our Sterling interest rate will be the same as the euro's - but that doesn't mean it'll stay that way. Imagine two aircraft. One takes off from New York to fly to London, the other from London to New York. At some point over the Atlantic they'll "converge" - but then continue to diverge at high speed. Even a broken clock is right twice a day! Our trade patterns are hugely different from the continent, with much more of our trade outside the EU. The same applies to our global investments. We are the world's second largest global investor, after the USA, and our foreign investments are far more globalised than the euro-zone's. This is another very strong reason why we need an independent monetary policy. There is a series of other key differences. Britain is much more sensitive to interest rate movements than euro-land. Both private borrowing (mortgages) and corporate borrowings tend to be variable-rate, not fixed-rate like the continent. Britain is an oil producer, unlike Europe, which is a major oil importer. Our economy is much less dependent on old-fashioned metal-bashing industries than say Germany - and our unemployment much lower. All these differences argue for an independent currency and an independent monetary policy - in other words, for keeping the Pound and not joining the euro. But the most fundamental convergence question of all relates to the cycle of economic growth. Does our growth pattern match the continent - or not? A new study by the respected bank ABN Amro, over the decade 1991 to 2000, gives us the answer - and a very dramatic answer it is. Economists measure the degree of matching, or correlation, with a figure that can vary from plus one to minus one. Plus one means an exact match. Minus one means an exact opposite, a mirror image. ABN compared four major EU economies, Germany, France, Italy and the UK, first with the EU as a whole, second with the USA. France, Germany and Italy all show a high correlation with the EU, between 0.7 and 0.9. But the UK's correlation with the EU average was only 0.1 - close to zero. The correlations with the USA were even more striking. France was highest at 0.5, Italy less than 0.2, while Germany was negative, at minus 0.5. The German economy actually goes in the opposite direction from the US. But the UK figure? Just shy of 0.8! The conclusion is very plain. The UK economic cycle correlates strongly with the USA - not surprising when you remember that each is the largest foreign investor in the other. But the UK hardly correlates at all with the euro-zone. I believe that the UK, with the world's fourth-largest economy, must keep its own currency. But if we were to decide to join a larger currency, there is a strong case that the dollar would be a better choice than the euro. We are not a European economy at all. We are an Atlantic economy. Note: The research referred to was complied by ABN Amro bank from 1991 -2000 and was supplied by the No Campaign whom you can contact at info@no-euro.com, or you can visit their website www.no-euro.com. A graph entitled "Relative Convergence: ABN Amro's analysis of the correlation of GDP growth in individual countries with (a) the US and (b) the Eurozone over the period 1991-2000" shows the figures quoted