importance of the eurozone as far and away our major trading partner, the weakness of the euro, in this case more specifically its weakness against sterling, also, of course, complicates our own monetary policy task in the uk. looking at the aggregate economic data the uk has had a rather good run now for the past seven or eight years. we have grown fairly steadily quarter by quarter at an average annual rate over that period of some 2¾ %, which is well above our longer term trend rate - usually estimated at around 2¼ %. employment has risen steadily so that the number of people employed is the highest on record. and the rate of unemployment is as low as it has been for about twenty years. meanwhile inflation on our inflation target measure has also averaged some 2¾ % over the past seven or eight years. helped by the dampening effect on uk inflation of the weakness of the euro against sterling, we have been below the 2½ % target now for the past year and a half, and currently - on the standard hicp measure - we have the lowest rate of inflation in europe at around 1 %. our problem in the uk is the imbalance within the overall economy between those sectors that are competing with producers in the eurozone, who are under considerable pressure, and the rest of the economy, which is doing relatively well. believe me, we are very conscious of the desirability of exchange rate stability with our partners in the single market - even though we recognise that membership of the euro provides only nominal, rather than real, exchange rate certainty, and is, of course, limited to the eurozone. why then do we hesitate? the answer - in terms of the economics of the euro - it seems to me - and here i differ from jean - claude - is quite straightforward - not a bit paradoxical or bizarre! it is because to join the euro we would have to live with the single monetary policy. it may be that in time we could expect to do so relatively comfortably. but had we joined at the outset the presumption must be that over the past two years we would have lived with both a lower exchange rate and lower interest rates during a period when we have in any case been operating close to productive capacity and growing at above trend. the likelihood therefore is that we would then have experienced something of an inflationary boom - as they have, for example, in ireland though i am not sure one can generalise from the irish experience.

the subsequent weakening of the euro since the beginning of last year has not made things any easier for us. just as, i suggested earlier, the euro is substantially undervalued in terms of the medium - term “ fundamentals ”, so in the same terms sterling is on most calculations substantially overvalued against the euro. to lower sterling to a more sustainable level in present conditions would again require an easing of monetary policy which would destabilise our overall domestic economy ; and this in turn would tend to set in train a process that would lock in a subsequent real uk exchange rate appreciation within the eurozone ( albeit from an initially less uncompetitive level ). that might help reduce sectoral imbalances in the short term, only for them to re - emerge. and in the meantime the whole of the economy would have been exposed to accelerating inflation, which we would be powerless to address through national monetary policy. frankly it is not clear to me that this is a risk which it would be in the interests of either the uk or the eurozone to take in today ’ s conditions. for the time being our best bet, it seems to me, is for both the eurozone and the uk to continue to pursue macro - economic - both fiscal and monetary - stability in parallel, and to hope that the euro recovers, as i continue to expect that it will. that strikes me as a more reliable path to the sustainable convergence which the british government has set as the essential economic criterion on which its decision to move ahead to a referendum on uk entry to the euro will be based.