Economics: It looks as though Tony Blair will have been re-elected to serve a third successive term as UK Prime Minister by this time next week.

Who would have predicted such an outcome eight years ago when he won his first general election? Who would have imagined that, within a decade of Margaret Thatcher winning her third term, a Labour leader would be embarked on a period in office that would last as long?

If a week is a long time in politics, a decade is long enough for the equivalent of geological change.

Blair's longevity is due to many things, but the economy must surely be one of them. The transformation of the UK's economic performance over the past decade or so has been nothing short of remarkable.

We in the Republic are so enamoured of our own economic achievements in recent times that we have overlooked what's been happening in the neighbouring island.

I think it's worthwhile taking a little time to set that to rights. The UK's performance is not without its significance for us - the UK after all is still our single most important trading partner - and it may even help to explain some of our own success.

In economic terms, the UK was the sick man of Europe for much of the 20th century. In the post-war years, it became one of Europe's most lethargic economies. In the early 1960s, it still enjoyed living standards about 20 per cent higher than the average for the EU countries but 30 years later UK living standards had fallen below the EU average.

Since then there has been a notable turnaround and economic growth in the UK has consistently outstripped that of the EU as a whole.

It is especially interesting to compare the UK's performance with that of the euro zone. Since Blair first became Prime Minister, GDP in the UK has increased at an annual average rate of almost 3 per cent, compared with a growth rate of just over 2 per cent for the economy of the euro zone.

Unemployment in the UK is now at its lowest level since the 1960s and the UK unemployment rate is not much more than half that of the euro zone (as recently as 1993, the rate was higher than the euro zone's).

Not alone has the UK achieved significantly faster growth, but it has done so to the accompaniment of a lower inflation rate. Since the inception of the euro in 1999, the euro-zone inflation rate has averaged just over 2 per cent per annum. The equivalent UK rate has been 1.2 per cent. The UK, in other words, has achieved virtual price stability. This is the Holy Grail of monetary policy.

The Holy Grail of overall macroeconomic policy is to bring about a situation where the economy is operating at or close to its potential output level all the time - in other words, where fluctuations in output around its long-term trend are eliminated.

This is a near impossible trick for policy makers to pull off, but policy makers in the UK have come close.

Again, looking at the period since 1999, the UK's average output gap (the margin by which output has exceeded or fallen short of its potential level) has been less than 0.5 per cent on an annual basis. The same gap has averaged more than 1 per cent in the euro zone over the same period (and more than 1 per cent in the US).

All of these achievements have been registered in the context of an active but disciplined fiscal policy. The UK government, unencumbered by the Stability and Growth Pact, has tended to use fiscal policy as a tool for stabilising the economy much more energetically than its euro-zone counterparts. Even so, over the past six years, the average annual budget deficit in the UK at 0.5 per cent of GDP has been much smaller than the 1.8 per cent of GDP average for the euro zone. Moreover, the UK government's debt/GDP ratio is much lower (43 per cent against 79 per cent).

As far as monetary policy is concerned, interest rates have remained consistently higher in the UK than in the euro zone. At the moment, the margin is close to 3 per cent. On average, over the past six years or so, it has been about 1.5 per cent. That's in nominal terms.

In real terms, of course, given the lower UK inflation rate, the average margin has been somewhat higher than this, at about 2.5 per cent.

Notwithstanding this, the growth of investment has been a good deal more robust in the UK.

Since 1999, the volume of gross fixed investment in the UK has increased at an average rate of more than 3 per cent per annum; the average growth rate across the euro zone has been less than 1 per cent. What this indicates is that, when it comes to investment, the influence of interest rates is outweighed by other factors, including the confidence of the business community about growth prospects.

When Blair first became Prime Minister, one of his projects was to bring the UK "closer to Europe", and part of that project was to pave the way for UK membership of economic and monetary union (EMU). Indeed, many of those who advocated the Republic's participation in the single currency from its inception in 1999 did so in the expectation that the UK would be on board in a few years. Six years later, the prospect of the UK joining EMU has become more distant than ever.

Ironically for Blair, a large part of the reason is the outstanding performance of the UK economy and the intelligent and effective use of those very policy tools that would have to be relinquished if he managed to persuade his countrymen to become part of the euro zone.

Jim O'Leary is currently lecturing in economics at NUI-Maynooth. He can be contacted at jim.oleary@nuim.ie