Should we join the Euro?

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Should we join the Euro?

There are many reasons for the UK joining the Euro.

For example, if UK joins the Euro, there is no longer any need to take into account the cost of exchange rates when the pound fluctuates against the Euro. Firms do not have to face this type of uncertainty any longer. For example, the Swedish car company, Volvo, claim that there will be a cost of $36.9million if they do not join the Euro. It is highly likely to be a similar situation for a British firm.

However, all the exchange rate costs that could be faced by a firm have not yet completely been eliminated. Although the pound would no longer have to fluctuate against the Euro as it will no longer exist, the Euro will still be on the global currency market, fluctuating against the Dollar and the Yen. The weaker the Euro may get, the worse the fluctuations will get.

Nevertheless, if the final aim is for all countries to unite and form a global currency, then this is a step forward in that direction. Also, almost 50% of UK’s trade is with Europe. Therefore it is good to at least eliminate this risk and lower a fraction of the costs incurred by the firm.

Join now!

If Britain joins the Euro, then there will be trade creation. This is when trade increases between the members of the EU, or any other trading bloc, due to economies of scale as the market has expanded. It cannot truly be a single market unless there is a single currency. With a single currency, UK will be able to export more as there is a bigger market i.e. there are 380 million consumers as opposed to 60 million. It is said to be calculated that two countries with the same currency would do thrice as much trade that with ...

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