The 16 nations joined by Economic and Monetary Union (EMU) are going through a torrid time. The three leading nations in the 10-year-old Euro – Germany, France and Italy – are all suffering downturns that are as severe as if not worse than Britain's. The world's economic downturn has exposed some powerful if uncomfortable truths about Europe's fixed exchange rate system. Britain is no nearer joining the single currency than it has ever been. However, important elements of political and economic solidarity – not least, issues of regulating financial markets – are drawing the UK closer to the rest of Europe.

People both in the UK and on the continent tend to forget that Britain is the most important trade partner of the Euro area, well ahead of the US and China. Regardless of Britain's position outside the euro, British Prime Minister Gordon Brown has been a frequent visitor to summit conferences on the crisis organised in recent months by French president Nicolas Sarkozy and German Chancellor Angela Merkel.

Brown's previous years of disdain about the economic performance of EMU members – most marked during his time as Chancellor of the Exchequer – have faded into memory amid a common perception that the nations of Europe sink or swim together. An intriguing question is whether the Conservative party – which looks likely to form the next government following the election that must take place by next spring – will be forced by similar considerations to take a more constructive line on Europe than hitherto anticipated.

On the crucial issue of the continent's weathering of the crisis, EMU's members have so far endured the financial and economic ravages with less disruption than if individual currencies were still circulating. On the other hand, the contradictions of shackling together nations in different stages of development with a single currency and monetary policy have become more apparent.

The euro area is beset by growing internal imbalances caused by increasingly divergent costs and productivity. Because weaker nations such as Italy, Ireland and Greece can no longer devalue their way out of trouble, there is a risk that these imbalances will worsen further – bringing pressures that, in an extreme case, could ultimately cause the break-up of the euro.

Germany, the largest and strongest economy in Europe, plays a central role. Speculation is growing that, as the effects of the economic downturn grow more severe, it may have to relax long-standing opposition to intervening financially to help weaker countries. That could involve modifying the "no-bail-out" clause of the Maastricht treaty which states that each country is responsible for its own debts. Ahead of this autumn's general election, such a course of action would be highly unpopular with German voters who would like the government to concentrate its aid on domestic companies in difficulty, such as the troubled General Motors' subsidiary Opel, rather than give massive assistance to profligate foreign governments.

However, an equal and opposite fear is that, unless such aid is forthcoming, weaker countries within EMU edifice may become increasingly politically and economically unstable – with grave consequences not only for German exports but also for the health of the entire single European market.

A still more potent source of concern centres on possible destabilisation of central and eastern European countries such as Poland and Hungary which acceded to the EU in 2005 and are in the "waiting room" of those preparing to join the single currency. Such countries, badly hit by the financial crisis, have made no secret of their desire to speed up entry to EMU to provide protection against the economic storms. However, in view of its traditional focus on financial stability, Germany is distinctly cool about weakening the EMU accession criteria to accelerate membership – and is still more reluctant to consider granting emergency financial aid to such struggling non-euro states.

Having decided to stay out when the euro started in 1999, Britain is maintaining a highly cautious line over euro membership. Britain is certainly enduring an extremely difficult period as the result of the recession and the country's apparently irrepressible economic buoyancy over the last decade has come to an abrupt end. But the ability of the Treasury and Bank of England to set the fiscal and monetary stance on the basis of the UK's own requirements is an valuable policy instrument. For all the severity of the economic downturn, Britain's economic and monetary independence may prompt the UK to recover from recession more quickly than many of its continental neighbours.

Sterling has been weak over the past 18 months against both the dollar and the euro. But the pound's decline from unsustainable previous levels is not a dramatic problem; far more, it is part of the solution to the UK's economic difficulties and reflects the greater economic flexibility that the UK enjoys outside EMU. The pound's decline and the Bank of England's policy of near-zero interest rates and "quantitative easing" (pumping money into the economy) will eventually succeed in rebalancing the UK economy towards lower growth and debt, and a smaller current account deficit.

Whatever the occasional calls for the UK to prepare to join the euro, I believe that Britain will stay outside at least until 2025. Anyway, over this period, the euro area is likely to be subject to great change. In the worst case – which would also spell bad news for Britain as the largest trade partner – EMU could be subject to fragmentation or even break-up as the policy inconsistencies at its heart become increasingly apparent. So the question of UK membership could look quite different in 15 years than it does now.

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