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Entry criteria to the Euro

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Introduction

1.Entry criteria The four entry criteria are set out in Article 121(1) of the EC Treaty. A Member State must satisfy all four criteria in order to be able to enter the euro area. (Treaty quotes Source: http://europa.eu.int/scadplus/leg/en/lvb/l25014.htm [02/02/2004]) 1.1. Price Stability The Treaty stipulates: "The achievement of a high degree of price stability [...] will be apparent from a rate of inflation which is close to that of, at most, the three best-performing Member States in terms of price stability." The inflation rate of a Member State must not exceed by more than 1.5% that of the three best-performing Member States in terms of price stability for a year preceding the test for criteria compliance. TRENDS INCREASING NO CHANGE DECREASING Country JUN 03 JUN 02 JUL 03 JUL 02 AUG 03 AUG 02 SEPT 03 SEPT 02 OCT 03 OCT 02 NOV 03 NOV 02 DEC 03 DEC 02 Belgium 1.5 1.4 1.6 1.7 1.4 1.8 1.7 Germany 0.9 0.8 1.1 1.1 1.1 1.3 1.1 Greece 3.6 3.5 3.3 3.3 n/a n/a 3.1 Spain 2.8 2.9 3.1 3.0 2.7 2.9 2.7 France 1.9 1.9 2.0 2.3 2.3 2.5 2.4p Ireland 3.8 3.9 3.9 3.8 3.3 3.3 2.9 Italy 2.9 2.9 2.7 3.0 2.8 2.8 2.5p Luxembourg 2.0 1.9 2.3 2.7 1.8 2.0 2.4 Netherlands 2.2p 2.1 2.2 2.0 1.9 2.0 1.6p Austria 1.0 1.0 1.0 1.4 1.1 1.3 1.3 Portugal 3.4 2.9 2.9 3.2 2.8 2.3 2.3 Finland 1.2 1.0 1.2 1.2 0.9 1.2 1.2 Euro-Zone 2.0 1.9 2.1 2.2 2.0p 2.2p 2.0p Denmark 2.0 1.8 1.5 1.7 1.1 1.4 1.2 Sweden 2.0 2.4 2.2 2.3 2.0 2.0 1.8 UK 1.1 1.3 ...read more.

Middle

TEST PASSED 2.4 Financial services Over the four years since the start of EMU, the UK has attracted a significant level of wholesale financial services business. The strength of the City in international wholesale financial services activity should mean that it continues to do so, whether inside or outside EMU. EMU entry should enhance the already strong competitive position of the UK's wholesale financial services sector by offering some additional benefits. Again, while the UK's retail financial services sector should remain competitive either inside or outside the Eurozone, entry would offer greater potential to compete and capture the effects of greater EU integration that would arise from the single currency and other efforts to complete the Single Market, in particular the Financial Services Action Plan (FSAP) TEST PASSED 2.5 Growth, stability and employment EMU membership could significantly raise UK output and lead to a lasting increase in jobs in the long term. As noted above, the assessment shows that intra-euro area trade has increased strongly in recent years as a result of EMU, perhaps by as much as 3%to 20%; that the UK could enjoy a significant boost to trade with the euro area of up to 50 % over 30 yrs; and that UK national income could rise over a 30yr period by between 5%- 9%. A 9% increase in national income would translate into a boost to potential output of around 0.25%/yr, sustained over a 30-year period. The failure in the convergence test means that, for the UK, macroeconomic stability would be harder to maintain inside EMU than outside at the present time. ...read more.

Conclusion

has shown that many in the profession (49%) believe that the UK should adopt the euro, although the majority of these do not want to commit to a specific timetable. A further 31% recommend that the UK should adopt a "wait and see" policy and delay any "in principle" decision to join. The survey, which covered Institute members working in both business and practice, asked respondents for their professional opinion on: * Their business's current exposure to the euro through their clients/customers * The current impact on the UK economy of non-membership * The current impact on their business of the UK's non-membership of the euro. * What the Government's future policy towards membership should be. Graham Ward, president of the Institute, commented "The exceptional level of response to our survey shows that chartered accountants see EMU as a major business issue. The majority view on whether the UK should adopt the euro ranges from favourable to agnostic, with relatively few opposed in principle. Overall, the UK's current exclusion from the euro zone appears to be having an impact on the performance of only a minority of members' own businesses." The results show that 89% of chartered accountants surveyed report that their business is in some way affected by EMU, either directly or through their supply chains. The survey also shows that members are fairly evenly split on whether or not the UK's current position outside the EMU is good for the economy (40% of all respondents say that non-membership is helping the economy, compared to 38 percent who say that non-membership is harming it). European Business Page 1 of 7 Christian HOGG HND Business 7 May 2007 99A0031270 D:\Documents and Settings\Christian\My Documents\HND Business\European Business\The single currency.doc ...read more.

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