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Should we go in the single currency

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Introduction

Should we go in the single currency The euro is a unified currency that is planned to take the place of national currencies following a referendum in the future. The use of the Euro will unite the member states creating a European super nation although this will in effect have implications; some good some bad on individuals, business, economies and governments. Before Britain joins the Euro the following criteria has to be satisfied: * The budget deficit has to be less than 3% of GDP, * The governments total debt has to be less than 6% of GDP, * Inflation has to be less than 1.5% higher than the average of the lowest inflation countries, * Exchange rates should be stable, * Interest rates should be in line with others and stable. Once this has been acomplished a further five economic tests have to be attained which are when business cylcles and economic structures are compatible, whether there is sufficient flexibility to deal with problems (asymmetric shocks), impact on investment (financial service industry) ...read more.

Middle

Consumers can also easy compare prices between member states, which will make firms more competitive for consumers as they will attain perfect knowledge. The Euro would also allow businesses transactions between member states to take place with confidence which should similate growth. Currently exchange rates pose a financial risk to businesses and individuals that are involved in foreign transactions. A sudden fluctuation in the value of a currency could see the cost of a particular item dramatically increase or decrease in a short space of time. A common currency would remove this threat completely. This may also encourage growth by enticing businesses to get involved in international trading. Exact costing of transactions can be calculated before the transaction takes place and the risk of an exchange rate fluctuation would no longer be applicable. This increase in foreign trade would also bennefit the country's economy by increasing export figures. This would have a positive effect on the balance of trade. ...read more.

Conclusion

The responsibility to control interest rates would be passed onto the European Central Bank. The problem which some economists forsee is that the rate changes will be made based on averages and not individual economies. As we have seen the ultimate steps towards the total integration of Europe as a trading block would be through monetary union and a single currency. The Euro has many advantages as discussd such as the abolistion of exchange rates which would enhance international trade, marker efficeincy due to more competition, the goal of the European Central Bank to lower unemployment and people will be able to assess the advantages and disadvanteges in relation to employment and goods and services. The disadvantages however are the loss of soveriegnity, unification of interest rates (what suits one country may not suit another), Britain would have no control over some aspects of the economy. As we have seen above; joining the Euro would carry many economic implications in which the good presently outweigh the bad. ...read more.

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