I know that the United Kingdom is in a difficult position as we all know there is a special relationship between America and Britain, but Britain is also dependant upon economic trade and relations with the rest of Europe. As the Iraq war has demonstrated we have seen that it is rather hard for Britain and Tony Blair to retain these two positions. In the near future Britain must choose if they want to join the single currency or remain semi-detached.
I believe there are great economic advantages for Britain joining the Euro:
Every time you travelled to a country of the European Union (before the euro was introduced) you would have had to exchange currencies and such transactions cost money. You pay commission on each transaction so banks and other financial institutions benefit from these exchanges. When international business competitiveness is important, it is hardly fair that businesses should lose money on such transactions. If the United Kingdom were to join the euro zone businesses would make large savings. Millions of British holidaymakers will stand to save on currency exchanges. To prove this just suppose you travelled from Belfast to Brussels with £100 two years ago before the euro was introduced. When you arrive in Brussels if you exchange the £100 pounds for Belgian Francs and then take the train to Paris and upon arrival in Paris change your Belgian Francs into French Francs; from Paris you travel to Amsterdam and exchange the French Francs into Dutch Gilders; from Amsterdam you fly to Berlin and exchange the Dutch Gilders into German Marks and continue on travelling around the capital cities of the European Union. Upon arrival back in Belfast it has been shown that you would have had just over £26 left, not having spent a penny. £74 would have been lost in foreign currency transaction costs!
If the United Kingdom had become more involved in the single currency before now, British businesses would have benefited from cheaper money. This is because the European interest rates are considerably lower than British rates. The opposition against joining the single currency could argue that because of this house prices would rocket as they have done in the Republic of Ireland. Although this is true to a certain extent it depends upon the time the United Kingdom enters the single currency because if the economy is moving in a downward direction lower interest rates would help kick-start the economy just as high interest rates would slow down an economy that is in a boom.
Before the Euro there was a great number of exchange rates between member states of the European Union. Now there are only three. Therefore one result of this is that there will be fewer fluctuations on a day-to-day basis.
The euro would lower transaction costs, it therefore brings lower interest rates and it would also lower the fluctuations on the exchange rate. This would then lead to greater levels of trade between the member countries of the single currency. This already happening within the euro zone.
Joining the single currency represents a major change and of course there are a few risks and disadvantages.
If Britain were to join the euro, the pound would disappear and the Bank of England would hand over control of the United Kingdoms interest rates to the European Central Bank in Frankfurt. Many people are upset at the prospect of losing the pound but they have rather short memories. For many years the pound has been a great problem for successive UK Governments. It has been over and undervalued for great periods of time and has caused hundreds of thousands of jobs to be sacrificed. From the mid 1990’S to last year the pound has been tremendously overvalued until only this year when it fell in value against the euro that the pound is at a realistic exchange rate. In my opinion, losing the pound will be no great sacrifice.
The United Kingdom is the world’s oldest monetary union. England, Northern Ireland, Scotland and Wales are held together by a common set of laws, a single currency, the same language and the ability of workers to move around the monetary union. Likewise the United States, the world’s largest monetary union, is successful because its 50 states are held together by the same principles as the United Kingdom. The opposition to the euro believes that the euro zone will not become a true monetary union because of the language difficulties, legal differences and poor labour mobility. I admit that the euro zone will not become a true monetary union straight away. Labour mobility will take a small amount of time to improve. However I am less worried about language differences because English is the dominant language in industry and commerce throughout the world. The anti-euro lobby is dominated by lots of, “Little Englanders.” They are afraid to openly co-operate with other Europeans and would prefer Britain to remain an island, isolated from continental Europe.
The issue of Britain’s membership of the euro is vital. I agree that it is a voyage into the unknown and it is easy to understand why many people feel comfortable with the current situation. Britain must become fully involved in the European project and must not embark upon another prolonged period of semi-detachment, of sulking on the sidelines while the rest Europe presses on with the vision of a united Europe. Britain must be more self-confident and take a more prominent role in shaping the new Europe.
