However, there are arguments supporting both sides to Britain joining the single currency and whether we go in at all will have to be decided based on the arguments.
It is thought that the single currency will make Europe richer because businesses will no longer have to worry about currency fluctuations as a fixed exchange rate will be given to all countries in the single currency by the European Central Bank and this means fluctuations and bank charges will no longer be an issue.
Britain’s big businesses will gain if we were to enter the euro i.e. the USA would rather invest and trade with Europe rather than Britain so Britain will get more trade and more investment which could improve the economy quite considerably. Also reduced exchange rate uncertainty for UK businesses and lower exchange rate transactions costs for both businesses and tourists will bring an increase in economic welfare. Eliminating exchange rates between European countries eliminates the risks of unforeseen exchange rate revaluations or devaluation.
If Britain did enter the Euro it could improve it from within as Britain has a strong economy it may be able to boost the European economy as a whole. Also a European currency will strengthen European identity. Federal Europe is not necessarily going to be a consequence of a shared single currency.
However there are arguments against the Euro which have so far prevented Britain entering the Euro in 2002.
Currency unions have collapsed in the past. There is no guarantee that EMU will be a success. People did not forget the failure of the ERM in 1990 when Britain joined a union and came out bruised and battered.
It is quite possible that the monetary union will not be sustainable; countries that discover themselves to be in difficulty may cancel their membership and re-establish an independent currency and an inflationary monetary policy. The example of Ireland’s departure from the sterling currency area suggests that leaving a currency union is beneficial, rather than joining one.
Joining the single currency would also put an end to Britain’s economic sovereignty. The rules that go with joining the Euro will restrict the measures the British Government can take e.g. varying interest rates.
The single currency had a political dimension- it has been said that it is another step on the road to federalism a “European super state”.
The single currency would only work if there is a tax harmonization. Trying to establish the same tax rate in the countries would be hard to achieve- ‘’one size fits all’’. It may lead Britain to big rises in VAT and income tax.
Britain’s economy is different as we have a very large percentage of the population who own there own house. In a country such as Germany it is very rare for anyone to own their own house so this could mean that mortgages fluctuate and interest rates change. The British economy is now in a strong position with little fluctuation so joining the euro now may dampen the British economy.