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Will the faltering UK economy be used as an excuse to join the euro?

As we covered just a few days ago, there is growing speculation that the faltering UK economy will be used as a basis to shoehorn Britain into the euro. Speculation from within the European Parliament and rumours from 10 Downing Street would suggest this is very much on the agenda in the short to medium term although there is too much going on at the moment to give the matter serious consideration.

However, a close look at the euro and the European economy as a whole would suggest that while the UK is in a worse situation, the European market as a whole is not significantly better. Today we see suggestions that the ECB (European Central Bank) may well be looking to reduce euro interest rates to 0% in the short term and align this with a more proactive fiscal policy.

This is very much a similar situation to the one in the UK, where fiscal stimulus has taken over interest rates as the main weapon to improve the UK economy. This is a very different approach to that seen during recent recessions whereby interest-rate movements alone have been able to inject confidence and funding into the economy when required. Whether the argument for the UK to join the euro will still be as strong in 12 to 24 months time remains to be seen.

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