Leading Article: The euro is here to stay

CONVERSION WEEKEND is almost over. There are no glitches in sight. The euro exists. The creation of the new money is an historic milestone on the road to European union. Eleven of our neighbours are in. We're out. What do we do now? The answer, alas, is clear: we assume what to Britain has always been the most comfortable position: we sit on the fence. In the press the Eurosceptics have the strongest, or at least the loudest, voice. They will continue to warn of the hellish consequences of monetary union. Let us do them justice. The arguments against joining are not piffling. All those who said the euro would never happen have been proved wrong. But this does not mean those who said it would happen are right. The economic object of the euro is to increase the level of business activity, while cutting prices for consumers, and in so doing to inject a new material vibrancy into the continent. The political goal is to bind a reunified Germany into a European federation of states and so preclude a mutant re-run of the wars that have decimated the continent in the 20th century.

But Kohl, Giscard, Heath & Co have no ungainsayable force of logic behind them. A single currency - with the European Central Bank in Frankfurt running it - could just as logically stifle business as stimulate it. If one of the 11 "in" countries elects a government that blames its problems on the euro and threatens to withdraw from monetary union, that could provoke war just as surely as a rampant German state.

Nor is the continental European political culture into which the euro is bound enticing. Eurosceptics overstate matters when they portray continental capitals as cesspools of corruption and ancien regime intrigue. But most who have dealt with Brussels would agree that transparency is not an adjective that leaps to mind when describing the way the EU works.

There is also the problem of our being an island enjoying a kinship with the US. Sometimes the special relationship seems to exist; sometimes it doesn't. But there is something there. Language, for one thing. A coincidence of economic cycles, for another. To join the euro could alienate us from Washington and Wall Street without bringing commensurate rewards.

Whatever the strength of these arguments for not joining the euro, however, we are convinced that there is one simple argument for joining that is stronger. The euro is going to work - both financially and politically. It will become a fixture of global finance. There is a crystallising consensus in the world's financial markets that the euro will succeed. If the markets believe the euro will succeed, then it will succeed, because currencies like everything else in the financial world ultimately rest on faith.

Legitimised as a currency, the euro remains vulnerable to recession in Western Europe, war in the Balkans, chaos in Russia, a crash on Wall Street. But no more so than any other currency. The arrival of the euro as a rival to the dollar confers multiple benefits on companies and individuals operating inside the euro-zone. Chief among these is the fact that euroland residents enjoy the privilege of protection afforded by the Group of Seven managers of the world economy to indispensable currencies - just as Wall Street investors were afforded protection last autumn when it looked like the global financial system was on the brink of meltdown.

If we could choose between joining the euro camp and the dollar camp, then there might be a reason to say no to the euro. But the luxury is not ours. The choice is between the euro and the pound. It is a choice between realism and threadbare romanticism. Much of the mystique attached to sterling is, after all, bogus. The Queen's profile on our banknotes dates back, not to Victorian times, but to 1962. And the Queen's profile was no protection against George Soros. The euro, on the other hand, would be too strong a currency for Soros to use as a gambling chip. It is true that if we sign up to the euro, we would lose sovereignty over our interest rates, but the so-called sovereignty of our economic policies as a whole has long since been ceded to the markets. Inside euroland we shall be better placed to stand up to the power of the global markets. Those upset by the fractional loss of sovereignty that results from joining the euro may take solace in the resurgence of Scotland, Wales and northern England in a Europe moving power to the regions as it gathers power at the centre. In the end, properly implemented, federalism is not a threat; it is an opportunity.