It is much more likely that it reflects the magnetic attraction of the US at present as a destination for long-term investment. And while that may partly reflect relatively greater flexibility on the supply-side of the US economy, it does not have much to do, as far as I can see, with the introduction of the euro. Of course, whatever the cause, the euro’s weakness complicates the task of monetary policy within the Eurozone. It adds to inflation in itself and amplifies the inflationary effect of the rise in oil prices. The ECB is rightly concerned to ensure that these effects do not feed through into an increase in the rate of core inflation. Given the importance of the Eurozone as far and away our major trading partner, the weakness of the euro, in this case more specifically its weakness against sterling, also, of course, complicates our own monetary policy task in the UK. Looking at the aggregate economic data the UK has had a rather good run now for the past seven or eight years. We have grown fairly steadily quarter by quarter at an average annual rate over that period of some 2¾%, which is well above our longer term trend rate - usually estimated at around 2¼%. Employment has risen steadily so that the number of people employed is the highest on record. And the rate of unemployment is as low as it has been for about twenty years.
Frankly it is not clear to me that this is a risk which it would be in the interests of either the UK or the Eurozone to take in today’s conditions. For the time being our best bet, it seems to me, is for both the Eurozone and the UK to continue to pursue macro-economic - both fiscal and monetary - stability in parallel, and to hope that the euro recovers, as I continue to expect that it will. That strikes me as a more reliable path to the sustainable convergence which the British Government has set as the essential economic criterion on which its decision to move ahead to a referendum on UK entry to the euro will be based. 3  BIS Review 92/2000