This paper examines what the euro means, both to the current offshore- dominated City of London (the City) and for its future development. With its offshore nature, the City benefits more from the introduction of the euro than being threatened. Its competitive advantage as an offshore global portal of euro-related business, however, does not harmonize opinions within the City on the issue of the UK’s euro membership. Rather, City practitioners’ attitudes are divided. This finding thus challenges the conventional wisdom that the City’s preference should be an indicator of the government’s decision-making because of its economic and political significance. Such divided attitudes, explained by this paper, reflect the City’s debates over two paradigms of how to develop a financial center—an ‘offshore City’ established through an international offshore approach on the one hand, or an ‘euroland City’ with onshore, European orientation on the other. With the trend of financial regulations around the world being liberalized/deregulated, and the offshore model’s weakness of the lack of autonomy and self-defence capability being exposed during financial crises, the former, argued in this paper, will appear more vulnerable than the latter in an era of globalisation. From the perspectives of maintaining competitiveness and enhancing autonomy, this paper contends that the advent of the euro and the UK’s euro membership could imply a historic opportunity for the City to transform itself from the current offshore entrepot to an embedded, substantial onshore center by utilising the backing of the euroland’s industrial strength, which, in itself, would be more sustainable and defensible in the long-term.
The European sovereign debt crisis emerged from a few euro members being stuck with high-deficits and high-indebtedness, and thus is oversimplified to be referred to as the euro debt crisis. It, in fact, consists of several individual crises with different causes. The Greek crisis was a governance crisis that lacks of fiscal disciple by nature; the Irish and Spanish crises were the bubble crisis of the property sector and banking crisis caused by the US sub-prime crisis; the Italian and Portuguese crises involve more structur..
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