Five questions that I don't think I will get an answer to (update)

Somewhat surprisingly I see that Mary Honeyball MEP has replied (well in part) to my five questions.

'Thank you for all the many and varied comments on this post, I have been reading them with interest. Unfortunately due to work commitments I will be unable to answer them all, but I thought I’d take this opportunity to answer NotaSheep’s list of questions which seem the most constructive in terms of this discussion. I will repeat each question here so that you can read them.

1) If the UK had joined the Euro more than two years ago would you expect UK interest rates to be lower or higher now?

Interest rates as set by the Bank of England were 3% on 25th Nov 2008, and dropped steadily to reach 0.5% in March 2009, since when they have been unchanged. Interest rates set by the ECB were 3.25% on 25th Nov, and dropped steadily to reach 1% in May 2009, since which they have been unchanged (key figure is Main refinancing operations). So in last two years we can assume that interest rates in the UK would not have been different to any large degree had we been part of Euro. In years 2002-2006 the data reveals that Bank of England rates were about 1.5-2% higher than European Central Bank. Obviously we cannot state what the ECB rates would have been had the UK been a member of the Euro, since the impact of the UK on the macro data and models the ECB uses to set rates would have been very high, given the relative size of its economy. One could argue that, assuming the ECB drew the same conclusions as the Bank of England Monetary Policy Committee, the rate of ECB rates would have been marginally higher than they were, but not as high as those set by the Bank of England. But this is mere speculation and impossible to prove.

2) If the UK joined the Euro within the next six months would you expect interest rates to rise or fall?

Given that interest rates BoE and ECB interest rates are virtually identical, and have been for the last 18 months, one would imagine that UK interest rates would not change greatly. Impossible to say however, depends on unknowns such as demand led-inflation resulting from any economic recovery, spike in commodity prices etc vs. decreases in wage inflation caused by austerity measures etc.

3) If the UK joined the Euro within the next six months would you expect the UK’s credit default swaps to rise by more or less than 300 bps?

I would expect them to remain where they currently are, assuming that UK’s triple AAA rating were to remain in place when it joined the euro. But again, total speculation.

4) What economics qualifications do you have that enable you to state that ‘joining the single currency … is the best one for our country’

I think we can all remember that the bankers, who we know had many economic qualifications between them, managed to get it so wrong on the economy.


5) If you are so certain that ‘joining the single currency … is the best one for our country’ would you support a referendum to put this question to the UK electorate?

I would follow the line of the Labour party on this issue.'

Hmmm. Let's see what we have here:
1) A good answer, I wonder from where it comes.

2) A good answer although there is no mention that by joining the Euro the UK would lose its freedom to set interest rates to suit its economic conditions and not those of a collection of other countries

3) An interesting answer

4) Oh dear, not an answer to my question but an attack on bankers. Is Mary Honeyball saying that because banker got it wrong a knowledge of economics is a liability, or at least not useful? I wonder what are her qualifications in economics, she must have some background knowledge to have answered points 1,2 & 3 so ably?

5) Oh dear it would seem that Mary Honeyball is a sheep - 'I would follow the line of the Labour party on this issue.' I hesitate to use the parental cliche but 'If the Labour Party told her to jump off a cliff would she?'

I will put these comments to Mary Honeyball and see what she replies, somehow I think that the she will consider the correspondence closed as she has 'answered' my five questions, even though she has only partly. However I may be wrong, either way I will report back.