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Evaluate whether or not the UK should join the Euro.

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Introduction

Information for the Examiner The purpose of this coursework is to evaluate whether or not the UK should join the Euro. Forms of research Research was done through newspaper articles and the internet. Result I came to the conclusion that the UK should not join the Euro. Introduction The Euro is a single currency that is supposed to be used by the fifteen countries that make up the E.U (European Union). At present, twelve of the fifteen countries use the Euro as their national currency, the countries that are not using it are Denmark, the UK and Sweden. There are reasons for and reasons against the UK joining the Euro. Advantages of joining the Euro One of the main reasons for the UK to join the euro would be to encourage trade with E.U countries. Encouraging trade is important because it increases competition among businesses causing the businesses to increase the quality of their goods and decrease their prices, which is good for the customer as they will save money and receive better quality goods. The customer will also have an increase in choice. Trade also lets countries specialise at what they are best at therefore increasing efficiency. ...read more.

Middle

Disadvantages of joining the Euro One of the main disadvantages of joining the Euro is that we would have our interest rates set by the European Central Bank. This could have devastating effects on our economy. For example, at present Germany's economy is in a recession, to get their economy out of recession, it would be wise to lower interest rates so that people wouldn't want to save money as it is not as worth while, and because the interest rates are low, people would borrow more, and spend that money as it is worth while. But the UK's economy is in a boom and to stop inflation rising to fast, we would want high interest rates to give people an incentive to save rather than to spend, which would slow down the rate of growth of the economy. Now, because the bank of England would no longer control the interest rates, we can not be sure that the European Central Bank would do what we want them to do; they might decrease interest rates to help get Germany out of recession. Doing so cause the UK's economy to boom so much that inflation starts to increase at a huge rate, which would not be good. ...read more.

Conclusion

However, economists are unsure if this is happening and how long it will take for the economies to successfully 'converge' but because the UK's economy is very different from the other E.U countries, it is likely that it will take a long time for us to be ready. When and if the economies converge, that would be the right time to for the UK to join the Euro. Conclusion In conclusion, I think that at present the UK should not join the Euro as it is still early days and is still unstable3. The foreign investment and trade that would occur if we did join would be very good for the economy, but at present the economy is already in a boom4 and is still successfully managing to trade with other countries. The main reason why I think that the UK should not join the Euro is due to the fact that the Bank of England will no longer set the interest rates, so they would not always be set to suit the UK' needs best. I think that eventually, after looking at what happens to other countries and if the economies successfully converge the UK may find it beneficial to join the Euro. 1 - From The Times business section exchange rates. 3/2/04 2 - From the Independent 'Economists Assess the Euro tests'. ...read more.

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