No need for euro to alert us to price differences

May 7 2009 by Peter Jackson, The Journal

IN the heady weeks and months following Tony Blair’s 1997 general election victory, a strong head of steam built up behind a campaign for the UK to join the euro.

In the event Gordon Brown scuppered the idea, thus denying Blair any sort of legacy for his premiership.

But none of that was apparent then and the end of sterling looked like a real possibility. Blair believed that once the British public went on its summer holidays and actually handled the new euro notes and coins, they would be won over, as though on previous trips abroad they had had to barter with the natives using coloured beads or bits of glass.

It was also argued that we would be convinced of the advantages of the single currency when it succeeded in levelling prices throughout Europe. The theory was that a single currency would make prices transparent so that a Dutch person, for example, could see how expensive an item was in their native Netherlands compared to say Germany, and demand parity.

People who believed that must also have believed, by virtue of us having a single currency in the UK, that a pint of beer costs the same in the West End of London as it does in the West End of Newcastle. No, the only levelling of prices that has occurred in the eurozone seems to have been universally upwards.

In fact, events this week show us that you don’t need a single currency to alert people to price differences and to enable them to take advantage of the lower price.

Tesco has slashed prices at 11 of its stores in the Irish Republic to try to dissuade shoppers flocking over the border to Northern Ireland to take advantage of sterling’s 20% drop against the euro in the last two months of last year.

It has dropped prices by an average of 22% on 12,500 goods at stores near the border to tackle a problem which has seen Sainsbury’s and Asda’s share of the Republic’s grocery market rise by more than threefold in the first three months of the year, even though neither chain operates south of the border.

Perhaps the Republic of Ireland should consider rejoining the sterling zone that it effectively left in 1979.

Peter Jackson is a writer and ex-business editor of The Journal – p.jackson77@btinternet.com