The real winner in Europe: the UK

The beacon of European integration can never be turned off by a nation with Germany's history, as Herr Kohl has made clear in recent comments. But there is a dimmer switch - delaying the start of European economic and monetary union (Emu). Once that happens, the whole thing will unravel, and markets will return to looking at each country's individual economic merits.

Which brings me to the UK. There are two judgements central to portfolio investment in the UK. The first is whether UK financial assets benefit more from Britain being inside or outside the Emu system. The second is whether future UK economic policy will break from the mediocrity of the past and provide a disinflationary platform for gilts and strong corporate profits.

At present, European countries are judged by financial markets largely on the assumption that the third stage of Emu will happen, and whether or not a particular...