A quick read.

While there is plenty of discussion and fear mongering on the pros and cons there is little mention of the main driving force behind the European Union.

The Euro.

The euro has proved to be exactly the job-destroying, recession-creating, undemocratic monster the doubters always warned it would be.

Unless the EU can construct a political governance system similar to that of a federal state it will be very difficult for the euro to survive never mind to overtake the dollar as the world’s dominant currency or, eventually, to maintain its status as the leading candidate to replace the dollar, although it could still be the dominant regional European currency.

Were the EU to approve a European Federal constitution, the euro would have a chance of replacing the dollar as the global currency in this century.

Meanwhile, the euro will continue to increase its global share of foreign currency reserves, financial and trade transactions and even exchange rate pegs and baskets in the coming years, but only as the second-best global currency.

Without the Euro there would be no European Union Market.

With the Euro the club members are locked to the strong economies whether they like it or not thus unable to reflect the state of their own economies making it unworkable in the long run.

In a few days the British will have their Referendum Stay or Leave.

If they leave will they destroyed the euro on departure.

Indeed, there are possible upsides to the euro’s fall. When a currency declines, imports typically become more expensive and exports become cheaper, lowering the trade deficit and creating jobs. It should make European offerings — be they German automobiles, Italian leather, French wine or even Greek vacations — more affordable, eventually helping the recovery.

If they stay should they not be subject to the same rules that govern the current members.

Another words should the EU demand that Sterling make the transition from the pound to the euro.

I am no financial wizard.

The likelihood of this ever happening is highly unlikely. Especially now that the euro is donning the cloak of supercharged monetarism, which is almost total in the face of grinding austerity, a double-dip recession that has already lasted 18 months and a jobless rate of 12.2% and rising in the Euro Zone.

This is not the received wisdom on the left.

When the crash came in 2007 it was a spectacular one.

The financial markets imploded, the banks stopped lending and cheap credit dried up. The housing market collapsed, unemployment rose, tax receipts shrivelled and the government’s budget deficit went through the roof. Speculation that the UK might leave the euro, as it had left the European exchange rate mechanism in 1992, meant investors demanded a high premium for holding UK government debt.

So is it time to create Spanish Euros, Irish Euros, Germany Euros, and in the long term English Euros all with their own exchange rate set against the GDP of the combined Members and forget about Federalism returning all member states to as they were before the introduction of the Euro.

There is no deep attachment in Britain to Europe as a political identity. Far from it.

However the market turbulence that will be caused by Britain’s exit may prove terminal for the euro and the break up of the Union.

Recently the UK even after Quantitative Easing (Printing Cash) on a massive scale had to accept an IMF loan the biggest the IMF had ever organised. It came with severe conditions,  including deep cuts in welfare and pensions and wage reductions across the public sector.

Deprived of the safety valve of currency depreciation, Britain had no choice but to do what Spain, Greece, Ireland and Portugal were doing and drive down domestic costs to make the economy more competitive. Speculation that the UK might leave the euro, as it had left the European exchange rate mechanism in 1992, meant investors demanded a high premium for holding UK government debt. Benchmark bond yields rose, first to 5%, then to 6%. When they hit 7%, Blair had no choice but to ask for help from the troika – the International Monetary Fund, the ECB and the EU.

Unlike in Spain, Greece, Ireland and Portugal, however, the buildup to the general election of 2010 promised the forthcoming Referendum.

Without this promise I believe Britain would have and would now be leaving the EU altogether.

So far only three currencies – have been able to become leading or dominant international currencies in the world’s history. Those that have done so tend to become monopolistic due to the centripetal forces derived from the existence of economies of scale, economies of scope and network externalities in their use.

The euro’s share in the world’s financial markets would receive a major boost if the UK were to adopt it, given London’s position as one of the world’s two leading financial markets, both in euros and in US dollars.

Furthermore, the UK has the EU’s second-largest GDP after Germany. In any case, the Euro Area (EA) is slowly expanding with the possibility of new EU members and other potential candidates joining in the future. At present, this is not the case with the US dollar.

The EU and the EA are only unions of independent nations and not a federal state, it will be extremely difficult to overtake the US dollar and maintain a dominant international role while the governance of the EU and EA remains unchanged.

Although in every country the currency is used by its citizens because it has the full guarantee of the State that issues it, in the international markets this guarantee is not a sufficient condition to make it of preferred use.

So the question is should the Uk be required to join the Euro irrelevant  of its own conditions to do so if it vote to remain.

Stage one would be the transition from the pound to the euro.

The most important part of this process, to fix the right level for the pound to join at, joining the euro at the wrong rate would penalise British manufacturers, while those already in the single currency were concerned that too cheap a rate for sterling entry would hand an added competitive advantage to the UK’s strong financial services sector.

The key to the Euro success will be to develop a wider export base, which means going beyond the euro zone itself.