Wednesday, January 21, 2009

Why would the ECB want the UK to join the Euro?

Sentiment on the trading and research desks of the big City firms is as dire as I've ever known it. The creeping realisation that the salary component of the remuneration package is likely to be larger than the bonus element isn't helping.Prop desks in many houses have had their hands tied and are ticking over at 10% of summer levels.

Lot's of talk about nationalisation of the banks, sterling at parity with the greenback, and a reduction in national installed capacity of 10%-15%. Some pundits are beginning to say the unthinkable that the UK will need to join the Euro. Question is why would the Europeans let us ? Entry would probably be at around £= 70/75 euro cents to make sense and that would only serve to boost UK competitiveness, and attract FDI into the UK from the rest of Europe. Whatever the outcome the UK government is at some stage going to have to address government spending with particular focus onpublic sector pensions. President Sarkozy remains convinced that the UK will have to come cap in hand to their European neighbours by the fall at the latest - the alternative being an IMF bailout. There's going to be plenty of fun ahead in the currency markets!

No comments:

Post a Comment