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Do the Benefits of Joining the Euro Outweigh the Disadvantages?

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Introduction

DO THE BENEFITS OF JOINING THE EURO OUTWEIGH THE DISADVANTAGES? Introduction The changeover to euro notes and coins is now complete across a 'eurozone' of 300 million people, for the majority of British people the debate over whether to adopt the single currency is just getting started. For most people in the UK the decision will not be an easy one. With those who have already decided, there will be people who argue that the introduction of the single currency is just the next step in the development of a truly single market which will lead to greater economic prosperity, stability and security for Europe's inhabitants, and that by joining the euro, Britain would get a part in what could eventually become the world's most powerful economic zone. Others believe that a successful common market is not dependent on the adoption of a single currency, which they see as merely another step towards the political union of Europe. This, they say, will lead to a loss of national sovereignty, weakening the voice of the British electorate. By presenting some of the arguments put forward by both sides of the debate over British membership of the euro, my aim is not to ...read more.

Middle

An appreciation of the Euro against the dollar subsequent to our joining would do the UK's important trade with the USA no favours. 9. UK firms would probably enjoy reduced borrowing costs, encouraging investment and growth, as British interest rates fell to European levels, and UK homebuyers would enjoy cheaper mortgages. It is true that industrial investment in this country has been persistently handicapped by the short term use of interest rates against inflation, but even the present level of interest rates in the UK appears to have set off house price inflation in the south. 10. Rip-off Britain: Those firms that currently price discriminate between different European markets would find it difficult to sustain this practice as price transparency increased. Some profits could be lost by UK firms, but consumers could benefit. Disadvantages of joining the euro: 1. As with ERM membership in 1990-2, a major concern of some economists is that membership of the Euro would deprive the UK of an independent monetary policy, and subject it to a possibly inappropriate monetary regime. If Euro interest rates were lower than seemed appropriate for the UK, as according to the Bank of England's Monetary Policy Committee they are at present, an ...read more.

Conclusion

these tests are subjective questions that perform a political rather than economic function; that is, they allowed the government to put off a decision that was likely to be unpopular. Several of the "tests" are unquantifiable matters of opinion, and will probably be subjected to anecdotal rather than scientific evidence in any referendum campaign. Conclusion: Overall, the benefits of United Kingdom joining the euro do outweigh the disadvantages. Plus the adoption of the Euro is likely to result in a stable trading climate within the Euro-zone, allowing firm's to make long-term decisions and realistic financial projections. Implementation of the Euro is likely to mean that both the UK, and the collective Euro-zone will have increasing influence in the world economy, and this will reduce the volatility of the Euro, thus promoting long-term trade with countries external to the Euro-zone. A further reason once more promoting the adoption of the Euro is the fact that British firms are likely to become more productively efficient as a result of the reduction in average cost arising from the incurrence of substantial economies of scale. � To euro - exchange rate This shows how the euro is becoming ever stronger against the pound. SALLY ROBERTS 1 ...read more.

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