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The Myth of a Weak Euro

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I’ve heard it said time and again: the Euro is weak, the Eurozone a busted flush. And the strange thing is that no-one seems to contradict it. I’ve been living inside the Eurozone for almost 10 years now. My income is in pounds sterling which I have to convert into Euros for my day-to-day spending. I can tell you from personal experience that the Euro is not as weak as the pound.

When we first moved here, late in 2006, a pound would buy 1.5 Euros. After the 2008 banking crisis, the two currencies came close to parity. This was a time when people from the Republic were traveling across the border into Northern Ireland to do their weekly shop because it cost them less.

2016-06-03The graph alongside is based on the records I have kept of the fluctuations in the exchange rate as published on the Yahoo Finance website. What it clearly demonstrates is that the damage done to sterling by the British government’s bail out of UK banks was far greater than that done to the Euro by the ECB’s bail out of Spain, Portugal, Greece and, of course, Ireland. It was the relative weakness of sterling that helped the UK economy recover more quickly than has the Eurozone. Even now sterling has still not regained the strong position it held relative to the Euro ten years ago.

The right hand end of my graph shows how the pound has fared in the first five months of 2016. As this communication from a leading currency trader points out, the pound falls every time a poll shows increased support for the leave campaign. Now, I am not so selfish as to want voters to base their decision on the impact of Brexit on my income and that of other retired Brits living in the Eurozone; there far too many much more serious consequences to consider, not least our security.

I have been a supporter of UK membership of the EU since the days when our repeated membership applications were rejected by the man we helped when his country was under Nazi occupation, Charles De Gaule.

Pathetic slogan

I can’t help the feeling that it is incumbent on those of us who grew up experiencing post-war austerity, and for whose parents the horrors of past wars and recessions were recent living memories, to explain to the younger generations that the past was not as rosy as some of the leave campaigners would have them believe. Nothing pains or puzzles me more than the number of people of my generation who appear to have forgotten. The pathetic slogan “I want my country back” that so many seem to have adopted is just that – a pathetic slogan. Make no mistake, those supposedly halcyon days are gone, never to return, in or out of the EU.

It is not just the UK that has experienced seismic changes over the past four decades. The whole world has changed beyond recognition. The forces that have brought about these changes – globalisation, climate change, international terrorism and mass migration among the most significant – are best resisted, to the extent they can be resisted at all, by co-operation and collaboration. I am reminded of the parable of the boy with his finger in the dyke. The flood might be causing substantial damage but removing that boy from his post to help with the clean up could cause the dyke to collapse, leading to far more damaging consequences.

Other cliches that spring to mind include throwing the baby out with the bath water, and ‘better the devil you know’. If it is fear that drives your decision, the greater fear, surely, is the unknown future that faces us when we are isolated from our allies.

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