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The Ostrich and the EMU

Policy Choices Facing the UK


There has been intense debate in the UK over the European single currency, but the ratio of light to heat has been disappointingly low. Discussion has centered on whether or not the UK should join monetary union; barely any attention has been paid to the crucial issues of how economic policy must change if the UK is to participate, or how policy must adapt if the UK stays outside. And there has been little analysis of how the date of entry would be affected by the time it takes for policy changes to be implemented and take effect.

This report of an independent panel, chaired by Rupert Pennant-Rea, considers the policy implications for the UK of different strategies on membership: aiming to join in the first wave; aiming to join later; waiting to see how EMU works out; or deciding, in principle, not to join.

The report analyzes the conduct of monetary policy, the implications for fiscal policy, how the institutions need to adapt, how the tax system should evolve, whether and how the transmission mechanism of monetary policy could be altered, the implications of EMU for financial supervision, the role of lender of last resort, debt management, implications for the labour market, and international economic relations.

This is the first thorough assessment of the implications rather than the desirability of EMU. By setting out a framework for analysis, it contributes a fresh angle to the public debate and the formation of policy. It will be of great interest to policymakers, practitioners, and academics.

Not available through Brookings in Europe and the U.K.

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