Report outlining the advantages and disadvantages of the Single Currency

AS and A Level Politics

Syazana Ahmad Nordin

11 GD2

TASK 4

To: Shareholders

Author: Syazana Ahmad Nordin

Position: Researcher

Date: 25th February 2003

Introduction

Currencies can be defined as ‘money in any form when in actual use as a medium of exchange, especially circulating paper money.’ Currencies act like a barrier to trade. Many countries have joined the single currencies. As a researcher, I am going to outline the advantages and disadvantages of the single currencies i.e. Euro.

Findings

The EU has approached that all countries in the Europe should affiliate a monetary union (MU) with a single currency, called the Euro. This is to avoid the commission that would change currencies, as well as to avoid the businesses from not knowing how much they will receive or pay.

UK may ultimately be participating the monetary union. The advantages of UK joining the monetary union as well as having single currency are:

UK will know exactly how much money they will have to pay if goods are exported to another countries that have already participated the monetary union.

The companies around Europe also will know exactly how much money they have to pay if they are buying the goods.

The firms will not have to pay a commission when they are changing the currency.

The firms will not have to waste time changing the currencies because they will ...

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UK may ultimately be participating the monetary union. The advantages of UK joining the monetary union as well as having single currency are:

UK will know exactly how much money they will have to pay if goods are exported to another countries that have already participated the monetary union.

The companies around Europe also will know exactly how much money they have to pay if they are buying the goods.

The firms will not have to pay a commission when they are changing the currency.

The firms will not have to waste time changing the currencies because they will be the same (in certain countries).

UK may have more power if it was a member of the single currency system, because they would be joined with other countries. If UK does not have the Euro, they would be with the minority of EU countries that do not have it. This means that their authority would be less remarkable that that of a EU country that has the Euro.

The establishment of the Euro in UK may bring advantages to people living here, who wish to go abroad to a country in the EU. The visitors do not have to exchange their money to the currency of the country that they would want to travel to. They will be able to decide if anything they buy from other countries is cheap or expensive, as it would be in the same currency.

If UK were part of the single currency system, then perhaps other businesses from countries that are also parts of it would want to buy British exports. This is because they know that they would loose their money from paying using the pound as its value fluctuates.

The single currency would improve employment circumstances across Europe. There would be more jobs such as printing the Euro, transporting it to the other countries.

There are some disadvantages of UK joining the monetary union, which are:

The monetary policies would no longer be decided at the Bank of England, but by a central bank in Frankfurt, i.e. UK would not longer be able to decide it’s own monetary policies, they would be centrally decided and also used in the other member of the single currency system.

If UK was part of the single currency system, then more businesses may want to trade here. This is a threat because they would take away sales from UK businesses.

The Euro to fully come into action may take some times, as the population will not be used to it.

Some people may not be happy with it and do not want to use it.

Conclusion and Recommendations

After thoroughly outlining the advantages and disadvantages of joining the single currencies, I can conclude that the single currency, which is Euro, is good for international trade purposes, but may be not for UK’s population. The people who live in UK probably not yet ready for the new currency because they want to stick with the pounds as they are used to it. Whilst the Euro brings advantages for the international trade because it would provide more jobs and also encouraging other companies to trade with UK. UK and other members would not lose money due to the value of their currencies changing and they would no have to pay commission when they change the currencies to enable them to trade with other countries.

I would recommend that UK to become part of the single currency system only for international trade purposes. For normal business across UK, the pound should be used until the rest of the population are using the Euro.