The UK and The Euro Zone

Galina Lyashenko

The UK and The Euro Zone

One of the main changes in recent years in the world economy – is appearance of a new sole currency for 12 European countries: Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal, Sweden and Greece. The main reasons for building a new currency are to rival the US dollar, and to strengthen and unite the European economy. There is a long pre-history of building the Euro with a several unsuccessful attempts e.g. the “Snake” system. Because of this previous experience and monetary losses, such countries as the UK and Denmark are undecided as to whether to join the Euro Zone. Should the UK join the Euro or to stay an independent country with their own currency and economic?

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This question has been very topical for the last years and still has not got unanimous answer. The are a lot of advantages for joining the Euro Zone. Firstly, with the British help the European Economy will succeed and grow faster and obviously this will make the trade links stronger. This will bring the Euro to more real rivalry with US dollar, which in the nearest future could replace the role of the US dollar. Taking into consideration that in the latest decade the USA economy had not grown very successfully. Secondly, the Euro will expand the tourism, which will bring more money to the country. Thirdly, as politics effects the economy and vice versa, the core of creating the Euro was a political decision taken by France and West Germany. Thus one of the main reasons of European unity in currency is the political power, which can be strong enough to rule the world and to control powerful and unpredictable countries.

Another point of view is that there are a lot of disadvantages for UK being a part of the Euro Zone. First of all, until now the UK economic growth is independently good in comparison with countries, which joined the Euro Zone and were in an unsteady position (Germany). Furthermore the trade links with the USA and Commonwealth countries, which makes a big difference between UK and Europe, keeps the Pound Sterling on a strong position and at the present time that shows that UK does not need any external help and can safely exist by itself. In addition, the Euro has not shown yet itself as a stable currency and there is no any guarantee of avoiding inflation. However, it is important to bear in mind that Britain is a country with a long history and deep traditions, therefore British people afraid to lose their own currency as a part of their national identification.

My opinion is that at this stage, when the UK is in the most advantageous position into other European countries, it can stay observing what happening with the Euro and not to be in a hurry with the decision. On the other hand, the Euro Zone is in need of an economically strong country to stabilize the Euro vis-à-vis US dollars, otherwise they will spend a lot of money trying to hold currency from slumping, which could lead to worse consequences. In conclusion, I agree with Peter Coffey, the author of the book “The Euro: essential guide ”: ”The Euro will clearly not be a replacement for the US dollar…but it will be an alternative.”