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The European Union.

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Introduction

Introduction At present the European Union is made up of 15 countries. This includes the UK, Rep. Pf Ireland, France, Germany, Denmark, Portugal, Spain, Sweden, Greece, Austria, Italy, Finland, Belgium, Luxembourg, and the Netherlands. All of these countries Except us, Sweden and Denmark belong to a single currency, the Euro. All these countries share the currency the euro, and it is thought to only be a matter of time until us, Britain, Sweden and Denmark join the Euro. The main debate in Britain at the moment is 'Should Britain join the Euro?' I am going to discuss the arguments for and against Britain joining the single currency. Currently Tony Blair had stated that in order for Britain to join the Euro it must pass 5 economic tests that will say whether Britain's economy is ready to be controlled by the European central bank. The 5 tests include:- * Test 1- Convergence * Test 2- Flexibility * Test 3- Investment * Test 4- Financial services * Test 5- Growth, Stability and Jobs At present Britain has not passed all of these tests but it is said to only be a matter of time until Britain does decide to join. The 5 Economic Tests 1. Convergence This test asks the question, "Are our business cycles and economic structures compatible so that we and others could live comfortable with the Euro interest rates on a sustainable basis?" ...read more.

Middle

As costs for businesses are being cut, then this would mean a decrease in the overall costs of products being sold to consumers. Products being cheaper will mean that more goods will be sold, allowing companies to expand in size. Because certain companies will be able to expand they will be able to take advantage of economies of scale. This is the idea that a bigger a company grows its costs per unit will decrease. This means a company can reduce cost even more, which benefits the business and will also benefit the consumer. * Clear price transparency will be beneficial to businesses as they can compare prices of different suppliers around Europe. This will increase competitiveness and encourage suppliers to cut prices. This again is another point that will help businesses cut costs, meaning cheaper prices for consumers. Because of clear price transparency, British consumers will find that goods will be cheaper abroad because there is less VAT paid on goods abroad. This will encourage the government to reduce VAT which will benefit the consumer. * Having a single currency will benefit the consumer, as there will be more comparison of prices. Consumers can compare prices of products in their country to what other countries are charging for the same product. This will mean businesses will be under pressure to reduce their costs as they will have to compete against prices in a wider market. ...read more.

Conclusion

Overall the current European taxes are a 1/6 higher than that of the UK so taxes could become higher. * The actual cost of joining the Euro will be costly for many businesses. The physical conversion of pound sterling to euro will mostly affect retailers and banks. In many cases it will be the smaller businesses that suffer. This is a short-term cost for all businesses and for larger businesses the long-term benefits will out weigh this short-term cost. The smaller businesses may find it harder to afford these conversion costs. *We do more of our trade in dollars than euros. If we joined the euro, which has been highly volatile against the dollar, it would destabilise British trade. Since the introduction of the Euro, British trade has increased by 25% so we don't need to be part of the single currency for our trade to increase. Conclusions There are many arguments for and against Britain joining the euro. That is why the debate to join or not to join the Euro has been going on for so long. In 1997 Gordon Brown set aside 5 economic tests, which he said had to be passed in for Britain to join the Euro. You can see these tests in the appendix. In June 2003 a referendum was made on whether the UK had met these tests. It was found that only 3 of the 5 tests had been met. This was investment, Financial services and growth, stability and jobs. Convergence and Flexibility did not pass the test. ...read more.

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