In the meantime the United Kingdom will prepare both for the introduction of the euro on the Continent from next January and for our own eventual participation. BIS Review 29/1998  ˝  -4-  The fact is that monetary union will have a major effect on this country whether or not we are a part of it, and it is clearly in our national interest as well as the interest of the participating countries, that it should be successful. We benefit in macro-economic terms from a stable and prosperous Europe just as Continental Europe benefits from a stable and prosperous United Kingdom - and the same mutual interest, of course, applies between Europe and its Mediterranean neighbours. We can contribute to that success in at least three ways. Most immediately the Government has undertaken to use its current term as President of the European Union Council of Ministers to promote an orderly decision-making process during the crucial next few months. Not being part of the first wave leaves us free to concentrate on that, and while there are issues - such as the vexed question of the Presidency of the European Central Bank - which only others can resolve, the UK’s role is to give them every opportunity to reach timely decisions. More fundamentally, we can contribute to the success of the euro, even from outside by continuing to pursue policies directed towards macro-economic stability and supply-side flexibility in parallel with those persuaded within the euro area.
The “economics” of Europe starts from familiar arguments in favour of free trade and competition as the most effective means of ensuring that productive resources are efficiently deployed, promoting specialisation in areas of comparative advantage - and thereby satisfying consumer demands more effectively and increasing aggregate, macro-economic, welfare. These arguments apply, in principle quite generally - as much to international trade and competition as to regional trade and competition or indeed to trade and competition within individual national markets. The macro-economic benefits are less immediately obvious at the micro-economic level. Existing activity is threatened by greater competition, and there is a natural temptation - to employees, their employers and their national governments - to seek to defend their established activity through protective action in one form or another. The benefits of greater competition, and of the removal of barriers or distortions to free trade, on the other hand, flow essentially from the future activity that is likely to result - so that they are much less tangible. And the benefits - anyway in the short-term - do not necessarily accrue evenly across the free trade area - they accrue to those that are flexible and adaptable enough to take advantage of the new opportunities that free trade offers.