Being left out of EMU is hitting exports. Is it time to join the Eurozone? Niall Fitzgerald and argue for and against Sir Richard George: The financial news has been dominated recently by the strength of sterling and the effect this is having on some sectors of the economy. But, in reality, the pound has been stable against other world currencies. The real problem is that the euro has been weak, falling in value by some 20% against the dollar since its launch. The weakness of the euro has caused problems for many companies who face competition from the Eurozone, but it is wrong to suggest that joining the euro would be a solution to this problem. Our European partners would never allow us to join at a rate lower than that set by the market. Joining EMU now would lock us into the euro at the current high level, perpetuating the current difficulties. And there is growing concern that the persistent weakness and volatility of the euro will lead to inflation and an unstable business environment in the Eurozone. A recent IMF report revealed that the economies of five of the 11 members were overheating. In Ireland, inflation is already running at 5.5%, three times the Eurozone average, while property prices have doubled in the past four years. Irish banks have been expanding their credit rapidly, which is driving the current inflationary boom. The right way to control inflation would be to increase interest rates, but Ireland has given up the ability to set its own rates and must now accept the one-size-fits-all interest rate set by the ECB. In contrast, Britain is able to set interest rates at the right level and we have delivered a stable business environment which has allowed steady growth. We have the lowest inflation on record, the lowest unemployment for 20 years and the lowest interest rates for 30 years. If we had joined the euro from the start, we, too, would now be experiencing high inflation which would have driven up costs for the food industry and placed our stable business environment in danger. It is often claimed that interest rates would be lower if we joined the euro but the government does not need to do this to cut interest rates and have a looser monetary policy. If the Chancellor wants to swap lower interest rates for higher inflation, all he needs to do is change the target he sets the Bank of England. While we keep the pound we have policy options like these, but if we join the euro these options close forever. Supporters of the euro also overlook the fact the long-term interest rate set by the bond market is actually closer to that for borrowing in sterling than it is for borrowing in euros. Our last currency experiment ­ the ERM ­ led to the collapse of 100,000 businesses, doubled unemployment and forced one million homes into negative equity. There are lessons to be learned from the ERM fiasco. There are serious dangers in losing control of our economy. But the euro does not just mean an unstable business environment. Last year, the prime minister launched the Government's National Changeover Plan, telling business to "prepare intensively" for the possibility of joining the euro early in the next parliament. An independent report by accountant Chantrey Vellacott DFK has revealed that the costs of euro entry would be a staggering £36bn. This includes the cost of changing coin handling machines, changes to accountancy and IT software, and the costs of training staff to use the new currency. Most businesses do not trade in the Eurozone. For them the euro means additional costs without benefits. They would still have to bear the cost of converting, while the removal of short-term currency fluctuations would be of little benefit. For those who do trade in the Eurozone, there is an obvious advantage in removing short-term currency fluctuations but this benefit is outweighed by the risks of abolishing our currency and losing control of monetary policy. Exchange rate fluctuations are not a new challenge. There has been variability over a period of many years between the pound and other currencies. The reality is that companies trading around the world have developed sophisticated ways of dealing with this problem through hedging arrangements and futures markets. Another factor strongly influencing the success of businesses in the food sector is labour costs. In the UK, non-wage labour costs are much lower than in the Eurozone. In Britain, employers' National Insurance contributions are half the Eurozone average and we have lower taxes and a more flexible labour market. We also enjoy lower businesses taxes with corporation tax rates of 30% compared to an average of 44% in the Eurozone. Tax harmonisation is now firmly back on the agenda with continental politicians claiming it is essential to make the euro a success. Romano Prodi recently described the right of Eurozone members to set their own taxes as a "non-starter in the real world". An ICM poll earlier in the year revealed that 73% of businesses oppose joining the euro. They understand that the euro would lead to a loss of economic control, and that the costs outweigh the benefits. Sir Richard George is chairman of Weetabix and a member of the National Council of Business for Sterling {{MANAGEMENT FEATURE }}