Should the UK join the Eurozone?

[Kristina Burns]

Has the UK’s retention of a separate currency improved its scope for handling the present crisis, or is joining the Eurozone a serious option for repairing the damage and preventing its recurrence?

[Martin Upton]

Well the decline in Sterling's value against the US Dollar and the Euro (amounting to, ineffect, a circa 25% devaluation since 2007) will help in the fight to get us out of the recession: exports are now more price attactive, imports less so thereby encouraging UK buyers to switch to domestic suppliers of goods (where that is practicable).

Clearly if we were in the Euro zone this 'policy' option would not have been open to us - although to be fair a weaker Sterling has arisen as a by product of the financial crisis and the consequent cuts in interest rates.  I bet there are some weak economies in the Euro Zone who are currently rueing the lack of capacity to benefit from the 'devalue your way out of recession' strategy.

Two points arise though:
1. By boosting import prices the fall in Sterling will put some upward pressure on price inflation. Higher import prices were cited as one of the reasons for the higher than expected Consumer Price Index (CPI) inflation number for February of 3.2% announced today (Tues 24th March).
2. Emphasis is being placed by world leaders on the avoidance of protectionist policies in dealing with the global recession. At what point, though, does a neglect of an exchange rate (which leads to imports becoming prohibitively expensive) amount to a 'de facto' protection of the domestic market?