Should Britain Join the Euro

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Should Britain Join the Euro?  

One of the primary arguments against joining is that there are severe structural differences between the members' economies. These may well undermine the success of the project, meaning Britain would do well to stay out. There is no guarantee that the Euro will be successful, and this is a key issue to consider when assessing whether or not Britain should join at this stage. Britain has already had her fingers burnt by the disastrous entry into the doomed European Exchange Rate Mechanism, the previous attempt to fix European currencies against each other which collapsed, plunging Britain into recession.

Another key argument against entry is the loss of economic independence that would be seen from Euro membership. If Britain were to join the Euro, our interest rates, currently the tool used for control of inflation by the Bank of England, would be set by the European Central Bank (ECB). Since being given independence the Bank of England has been successful in controlling inflation in this way. Problems could well arise if Britain loses interest rates as a tool for its own economic objectives. The past few decades have shown we need all the measures we can to keep control of the economy!

To illustrate this problem, let us suppose that there are inflationary fears in Germany and France, two influential member countries, but not in Britain. In response the ECB is likely to set high interest rates to dampen economic activity and curb inflation. However, in Britain this dampening of activity is not needed as there is little inflationary pressure. The high interest rates set by the ECB merely serve to slow down the British economy. This problem may be aggravated by the fact that Britain is very sensitive to interest rate changes. This is due to a large percentage of variable-rate mortgages, and companies being heavily reliant on debt finance for investment.

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Fiscal policy would also be lost, to a certain extent, as a tool for economic management, due to the fiscal stability pact which limits national budget deficits to 3%. So the government cannot spend its way out of trouble.

Some argue that the 'menu costs', ie. the costs to businesses of having to change all prices to Euros, will be significant. This may hit small to medium sized businesses very hard. However this is very short-termist and I don't feel it is a significant argument against joining.

The main argument for membership is that of the ...

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There are major problems here. The second set of answers don't address the question, so either the question has been typo'd or the answers are irrelevant. The first mini-essay is satisfactory, but lacks a clear argument expressed at the beginning and makes up for a slightly ropey grasp of the facts by using lots of emotive language.