§ Mr. GryllsTo ask the Chancellor of the Exchequer if he will set out his current assessment of the effect of a single currency on the annual gross domestic product of the European Community.
367W
§ Mr. MaudeIt is too early to predict what the effect of a single currency would be on Community GDP. Potential benefits might accrue from reductions in transactions costs and exchange rate risk, and lower inflation. But compared to existing ERM arrangements, a single currency does not of itself guarantee lower inflation or reduced exchange rate risk against non-Community currencies, and the transactions cost advantages are unlikely to be large. Moreover, the success of any move to a single currency would depend on Community economies first having achieved sufficient sustainable convergence in terms of inflation rates, interest rates, budget deficits and market flexibility. Otherwise there would be adverse effects on Community GDP and unemployment.