Removing exchange rate volatility encourages trade and investment, and this gain outweighs any costs for most countries. The euro cements this gain. It also removes power from local elites who use devaluation to their advantage, in part to avoid difficult decisions on structural change. Reducing expected volatility is the core reason for having a currency area. It has produced benefits, but perhaps some countries joined before they were ready.

Different labour market policies are only a part of the explanation of lower real wage growth in the UK than in Germany or France. Employment growth has been more rapid in the UK than in either France of Germany in the last decade, and real wages have fallen both relative to others and relative to the past. This would suggest a movement of the supply curve along a demand curve. If wages had not been flexible we might have seen more unemployment, and less labour force growth. The latter would have come from lower participation and from less inward migration. However, if the new labour had the same characteristics as the existing labour (skills, attitudes) we would expect to see an increase in the capital stock. If the increase in labour supply had been anticipated, then capital may have increased with labour, if the increase was not anticipated, the increase in capital would follow, generating demand. We have not seen an increase in the capital stock of anywhere near the needed proportions . This could be because the new labour is less useful, or because managerial incentives are holding back investment in favour of dividends. Both may matter. It is more likely that investment has been held back by the risk, and now the certainty that the UK would leave the Single Market. This will probably reduce productivity by six per cent as compared to where it would otherwise have been, and some of this we may have already seen,