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Should Britain join the Eurozone

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Introduction

The euro zone was created in 1999 and fully operational by 2002. It embodied 12 countries in a single currency, and henceforth created a single market and an economic trading block. The issue is weather the UK should or should not join this block. There are advantages and disadvantages and consequently business people and politicians alike still have split opinions. Currently businesses trading with Europe have to deal with the exchange rate, such things as transaction costs may cut into profits also with two free currencies there are fluctuations that have to be overseen. For example in relation to export earnings if a firm makes a profit off shore and then wishes to use this capital to reinvest within the UK sector of the business' if the Euro has weakened in that time then the firm will lose out on this profit. Also imported raw materials can be an issue if the euro is strong when the need for imports of materials the firm will not get as much for their money as if the euro was weaker to the pound, this affects costings and budgets. This is a solvable problem, buying futures, ( buying at a future price also called buying short) means that these fluctuation can be disgarded from the issue although if currencies go the alternative way to the expectation of the experts money is often lost and also these contracts and the expertise to decide when and how much to buy is expensive. ...read more.

Middle

Something that any country including the UK would benefit from. Also this is brought about through no barriers between countries in the block. This block is enormous and all within the same set of rules this would encourage economies of scale meaning even more efficiency and henceforth benefits for the consumer. Because the firms would be working on a big enough scale to drive down cost hence increasing efficiency. Then the availability of choice of raw materials also counts towards a more competitive market because resources are a lot less scarce in this single market driving down prices. Also on the labour front the productivity in the euro zone is 20% higher than the UK. This also means greater competitiveness in world markets which would seem to be the largest objective. All these factors lead to arguably most important factor and that is the increased foreign investment. Singular European countries would not have been a significant player competing against the US, China, India etc. However as a single market they attract investment from these countries because of the Euro zone's competitive market and sheer size. For a Japanese car firm to base itself within the Euro zone it is reaching far more potential customers than locating somewhere else. All these issues are strong benefits for the UK to join the Euro zone - economic growth and hence a better standard of living, increased strength in world markets and cost savings when trading within Europe. ...read more.

Conclusion

Hence unemployment in the Euro zone is at 8% whereas ours is at 5%. Some people would argue that Britain's largest economical asset would be the City. Could we afford to lose control of this. If we were to oin the Euro zone not only would control over interest rates be sacrificed but also control over bonds, mergers, acquisitions and forex trading. This is a large part of our GDP. We have more financial traders working in the City than the population of Frankfurt. To relinquish control would effect our prosperity. However many experts in the field also counter this with the fact that the reason for our success in this area is because of our link with Europe, that link that ensures 'stability', if we were to destroy hopes that sometime in the future we would join the Euro zone this success may cease. However you cannot escape the skills, expertise and prosperity that has built up in this area, Euro or not. Many critics use the arguments of our financial structure to detract from joining the Euro our interest rates do fluctuate a lot more than that in the Euro zone. However this isn't really a sound argument seeing as 12 very different countries have joined and although some like Germany have incurred teething problems there are no long term disadvantages. ?? ?? ?? ?? Should Britain join the Euro zone - Lily Fox-Davies ...read more.

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