Let battle commence

By Ian Fraser

Sunday Herald,

July 15th, 2001

LOVE it or hate it, there will soon be no getting away from the euro. The new currency becomes a tangible reality in 12 European nations in just over five months’ time. That means euro notes and coins will be circulating and available from cash machines across the continent.

What’s more, the “creeping euro” is also going to hit these shores, with some manufacturers obliging their suppliers’ invoice in euros and the new currency becoming as acceptable as pounds in chains such as Virgin Megastores.

On New Year’s Day, otherwise known as E-day, Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain will scrap “legacy” currencies – including the deutschmark, drachma, franc, guilder, lira, peseta, punt and schilling – and adopt the euro.

Adopting the new single currency is going to cause major upheaval across the continent, and “peripheral” countries such as the UK are not going to be unaffected. There are justifiable fears that retailers will cash in by rounding up their prices, causing a sudden inflationary spiral.

But is this grand European project, no less ambitious than the Treaty of Rome which kicked off the European movement in 1958, really going to be worth it? And does Scotland stand to win or lose by the UK’s decision to sit on the sidelines and watch as its European partners make their giant leap of faith?

Even the most ardent of euro-sceptics probably finds it hard to deny that using the same notes and coins across the euro-zone – a massive region stretching from Amsterdam to Athens and from Lisbon to Berlin – is going to make both travelling and doing business there simpler and cheaper.

Foreign exchange costs within the euro-zone will be eliminated, as will uncertainty about which way a particular currency will move on the foreign exchange markets. This will eliminate hedging costs at a stroke – depriving European banks of a tidy little earner.

Prices will become much more transparent, benefiting both consumers and industrial buyers. But this will also make it more difficult for manufacturers to hide behind the facade of currencies in order to over-charge for their wares in particular countries. The downside for British car buyers is that, as a result of the UK’s decision to stay out, global car companies will continue to treat the UK as their “Treasure Island”.

Yet the anti-euro campaigners have some powerful cards up their sleeve, not least of which is the support of the multi-millionaire businessman Paul Sykes. Yorkshireman Sykes, who made his estimated £350 million fortune from breaking up buses, the Meadowhall shopping centre and from internet services provider Planet Online, has pledged at least £25m to help fund the “no” campaign in any referendum on the euro.

The “antis” – who also include lobby group Business for Sterling and the tattered remnants of the Tory right wing – remain a powerful force in the UK, despite the drubbing they took in the recent general election.

They argue that the risks of euro-membership far outweigh the benefits. And the risk they highlight the most boils down to one thing: loss of sovereignty.

The fear is that sacrificing control of UK macro-economic policy to Brussels and Frankfurt would be too big a price to pay for any efficiency gains accruing from signing up to Economic and Monetary Union (EMU). And their case has, to an extent, been reinforced by the deftness with which Sir Eddie George and the Bank of England have handled monetary policy since the Old Lady of Threadneedle Street got its independence in 1997.

The anti-euro people argue that the European Central Bank in Frankfurt would be less attuned to the UK’s particular needs, whose economic cycle they claim is anyway out of synch with that of Europe.

Tony Tucker, campaign director of Scottish Business for Sterling, said: “We would lose control of our country full-stop. We would lose the power to make decisions that are applicable to our economy. It’s very difficult for business to operate in an unfriendly business climate”.

But for pro-euro campaigners, the single currency is a clear-cut case. They argue that the economic benefits of euro membership far outweigh loss of sovereignty – which they say is anyway ebbing away as the world economy globalises.

Some in the pro-Euro camp go further. Jim Mather, executive director of Business for Scotland and national treasurer of the SNP, warns that Britain is headed for economic desolation should we fail to sign up.

Freddy Johnston, the retired newspaper publisher who recently became chairman of the lobby group Scotland in Europe, does not take such an extreme stance. However he says the UK is already seeing its sovereignty ebb away.

Johnston acknowledges that joining the euro is going to be “far from painless” – referring to the potential difficulties in “realigning exchange rates and interest rates”, given that a 15% to 20% devaluation of sterling would be required before the UK could join up.

But he adds: “The alternative is much worse. If we remain outside the euro, the UK will be isolated and without influence. We’d just be drifting along, with sterling buffeted this way and that by the international currency speculators. As an undergraduate in the 1950s I supported Britain signing the Treaty of Rome.

“In a globalised world, we need to be in larger units. And I subscribe to the view that there will eventually be only three of these: Japan/China, the USA and Europe.”

Johnston adds that, unless the UK accepts it must sign up to one of these groupings, “we will increasingly be second-class citizens, with less and less influence, increasingly isolated from decision-making and without any say in the setting of rules.”

Some euro supporters complain that British prime minister Tony Blair, whom they thought would start championing their cause soon after regaining office last month, has gone strangely quiet on the issue.

One “yes” campaign insider said: “Yes, we are disappointed that things haven’t moved more quickly. The election result gave Labour a huge mandate and the Tories fought and lost the campaign on saving the pound. We feel that Blair now has a moral mandate to create a national debate about issue of Europe in general.”

Mather is no less disappointed by Blair’s new-found hesitation on the issue.

He said: “Blair’s being led by focus groups. He had a mandate to put the referendum on the fast-track, and start selling the benefits of the euro, but he’s succumbed to timidity. That will cost us. The Irish are already rubbing their hands with glee at being the only English-speaking country in the euro-zone and are already capable of cherry picking the best foreign direct investment projects.”

Tucker, however, dismisses this as propaganda. “He [Mather] should look at the figures and see where the jobs are really going. In the latest figures compiled by Invest UK, Britain is getting more inward investment than France and Germany put together.”

Nigel Smith of David Auld Valves, another leading anti-euro campaigner, believes that his opponents have shot themselves in the foot by depending on cheer-leading from Blair.

Smith said: “By demanding prime ministerial leadership, they have forced the five tests into the political arena, making every intervention by the prime minister a source of speculation as to whether he is undermining his Chancellor. To brand their own as the political establishment is a fatal error in this age of cynicism about politicians.”

Nevertheless Caroline Boyle, national organiser of Scotland in Europe, seems relaxed about the government’s shift in focus away from talking up the euro towards doing “a lot of ground-work behind the scenes”.

Blair’s unexpected silence has probably been brought on by a mix of opposition from a euro-hesitant (and ambitious) chancellor and the pragmatic realisation that a referendum is unwinnable with most of the UK’s press set against the single currency. But the prime minister may well be more willing to stick his head above the parapet after E-day, providing Britons have had the chance to see the euro at work.

Johnston remains confident that a referendum on euro membership will be held before September 2003.

He said: “I believe the referendum will be held comfortably ahead of the next general election”, which must be held by May 2006. Johnston added that he is well-acquainted with Blair, who he has known since 1990, and that Brown – the man who as chancellor would be tasked with “putting the bits together” – is correct not to charge headlong into the euro debate.

“The outcome is much more assured if this is not rushed,” said Johnston.

But the ex-chairman of Johnston Press is open-eyed about the dangers of a referendum. “People often vote for reasons other than the issues that are at stake. Referendums give people the chance to say they’re fed up with the current government.”

He points to the March 1979 referendum on Scottish devolution, in which he believes many Scots supporters of devolution voted against purely out of frustration with the Callaghan government.

Instead, Johnston draws parallels with a 1975 plebiscite on whether Britain should remain in the EEC. Held a year into Harold Wilson’s second administration – and two years after the UK joined Europe – this culminated in a resounding “yes”.

But Smith warns against parallels with 1975.

“The government was defending the status quo not, as now, proposing change. The campaign hung on the political pretence that the European treaty had been successfully renegotiated in Britain’s favour. This pretence was accepted in the more deferential society of quarter of a century ago. But times have changed.”

Johnston dismisses his opponents as being “large in numbers but small in clout”. He adds that the anti-euro camp is peopled by “Poujadists”, including “smaller businesses who have not really given much thought to the global context and who are incapable of accepting that the British Empire is a thing of the past. “It’s a King Canute exercise. Many are motivated by a desire to put the clock back.”

He added: “Significant businesses will not be too hard to persuade. But one-man-band businesses, whose views are often shaped by personal prejudice, are more resistant to change and find it harder to take the wider view.”

But Mather doubts whether silence from Downing Street is going to get in the way of selling the euro to the wider UK electorate. “At the end of the day this is an easy sell. Joining the euro means that companies can reduce their selling price by 20% and feel no pain. They are also more likely to remain in Scottish hands. When it comes to getting across the practical repercussions of joining the euro, we intend to drip-feed messages about how, within the euro, there will be more jobs, higher salaries, lower mortgages, continued FDI and lower prices.”

THE PRO-EUROS
John Baxter, ex-managing director of Ennstone
Arthur Bell, formerly of Scotland Direct Holdings
Andrew Bissell, of Voxar
Ivan Broussine, of the Scottish Tourism Forum
Gerrard Cassels, of Inveresk
Stephan Kay, formerly of Inveresk
Freddy Johnston (right), formerly of Johnston Press
John McKerchar, of BDF
Geoffrey Maddrell, of Glenmorangie
Jim Mather, of Business for Scotland
Hugh Morison, of the Scotch Whisky Association
Jeremy Peat, of the Royal Bank of Scotland
Ray Perman, of Scottish Financial Enterprise
John Price, of McPhie’s of Glenbervie
Denis Robertson-Sullivan, of PS Communications
Wali Tasser Udin, of Britannia Spice Foods
David Walker, marketing and PR consultant
Jim Walker, of Walker’s Shortbread
Gordon Wallace, of McKean Foods

THE ANTI- EUROS
Hew Balfour, of Havelock Europa
Martin Bell, of Quisine Foods
Robert Boyd, of EDC Pipework Services
Russell Cameron, of R&D Cameron
Sir Ian Campbell, of Select Assured Properties
Ian Crighton, of Lawrence of Kemnay
Greg Deakin, of Apex Industrial
Michael Denny, of Northern Venture Managers
Alan Farrow, of Peak Scientific Instruments
Margaret Gunion, of Jeden
Alex Hammond-Chambers, formerly of Ivory & Sime
Garth Heron, of Garth Heron Search
Stuart Hutton, of Priory Hotels
Stuart Laing, of Laing the Jewellers
James Laurenson, formerly of Adam & Co
Alasdair Locke, of Abbot Group
William Lovie, of Lovie
Angus MacFadyen, of Axiom Partnership
David McCarthy, formerly of Unilever
William MacNair, of Black Isle Communications
Sir Donald MacKay, of Grampian Holdings
Alastair MacMillan, of White House Products
John MacSween, of MacSween, Edinburgh
Simon Miller, of Dunedin Capital Partners
Richard Muir-Simpson, of Adaptive Venture Managers
Greer Murray, of McConechy’s Tyre Services
John O’Neil, of Strathclyde Homes
Gavin Reed, of Broadgate Management Services
William Roxburgh, of Roxburgh & Co Dr
Alan Rutherford, of Newton EH6
David Sadler, of Aardvark Holdings
Alastair Salvesen, formerly of Christian Salvesen
Nigel Smith, of David Auld Valves
Malcolm Scott, of Dunalastair Estates
Patrick Scott, of Reach for Success
Max Stewart, of Canonmills Apartments
Jim Sillars, management consultant
Ivor Tiefenbrun,of Linn Products
Marcus Tiefenbrun, of Castle Precision Engineering
John Wright, of Clydesdale and Yorkshire Banks

Copyright 2001
Provided by ProQuest Information and Learning Company. All rights Reserved.

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