Recession could trigger euro adoption, says Cable

LIBERAL Democrat deputy leader Vince Cable has said this recession could be the trigger for the UK to dump the pound and join the euro.

He also said the economy is still suffering the effects of the equivalent of a “massive heart attack” and that unemployment is likely to continue to rise for the foreseeable future.

“In three to five years time, if the British economy is still struggling and the European economy is doing better, as Germany and France seem to be doing, it could be that people look across the channel,” he told the audience at the Institute of Directors annual dinner, held at the Lowry Hotel last night.

“It’s not time yet. But if the currency position becomes unsustainable then we will be forced into that position.”

He said big difference between this and previous recessions is that devaluation happened right at the start this time, which has helped.

“So far so good, the currency was over valued and it had to adjust,” he added.

But he said that unemployment will continue to grow, even if the recession ends in the next two months.

“What is keeping the patient going is some extraordinary economic medicine that hasn’t been applied in reality before.

“But there are serious problems ahead that will make the recovery hard to sustain. The monetary steroids will be withdrawn but we don’t know how much the economy will react to this,” he said.

The biggest problem is presented by the budget deficit, he added.

“Issues need addressing that will be politically very contentious. If we don’t there is a risk of the situation spinning out of control.

“Beyond that, how do we get back to economic growth? Devaluation will help but there are other factors inhibiting growth. Most growth will come from private companies.”