In hindsight, the right decision

For Asif Ahmad, the UK ambassador to Thailand, the British government’s veto of the European Union’s (EU) plan to make treaty changes for greater fiscal discipline among member countries amid the ongoing euro-zone debt crisis was no doubt dramatic. Yet, the envoy insisted that the UK’s future is tied to the future of Europe, and hoped that the debt crisis would be eventually fixed.

In fact, Britain is in a unique position as far as the EU and its single currency system are concerned. In 1973, Britain joined the current 27-country EU, but it later opted to stay out of the single currency system, or the euro, which currently has 17 member states.

Last week, Britain was criticised for vetoing the treaty changes for fiscal union among member countries on the grounds that the UK’s City of London’s financial services industry would be negatively affected by the EU regulations.

According to Ahmad, the UK’s financial services sector is a global player, so it expects a level playing field for all countries concerned.

The City of London is currently ranked among the world’s top-three financial centres after Hong Kong and New York.

As one of the 27 EU member states, the UK, however, has fully supported the union’s single market, free trade, human rights as well as security policies. But the country’s voters chose not to join the euro, which proved to be a wise decision.

In his opinion, the euro-zone single currency remains an “unfinished project”.

The system was supposed to have a convergence of tax, interest rates, welfare and other policies over a period of 5-10 years after the launch of the euro as the single currency, but this did not happen. Therefore, the euro-zone economies have witnessed the current debt crisis in peripheral member countries such as Greece, Ireland, Spain and Portugal, even Italy, while the wealthier members, Germany and France, are reluctant to pay for bailout programmes.

In hindsight, it could be argued that one of the biggest challenges at the start of the euro was that each of the member countries was at a different stage of development. For example, Ireland was not a Germany, which has a much stronger economy. As a result, the single currency system could not work unless there was a convergence of fiscal and monetary policies.

Regarding the UK, he said the country wanted to control its own policies as part of its “globalist” approach, so it did not sign up for the euro and continued to use the pound sterling.

“We want the euro zone to fix its problems. The UK will play its own part,” he said, adding that the euro’s disintegration, as speculated by some analysts, is certainly not in the UK’s interest.

Due to the global economic crisis, the UK has been implementing its own austerity programme to get its house into order. This will take up to a decade to complete, he said.

On Asean, which now has 10 member countries including Thailand, he said there are crucial lessons that Asean may learn from the EU and its single currency system.

In his opinion, the benefits of an EU-like model have been obvious, such as the Asean Charter on human rights, which is similar to that of the EU, or the Asean Economic Community, which will promote freer trade, investment and labour flows among member countries in a fashion similar to the EU’s single market.

However, there will be reservations regarding a single currency among Asean economies.