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 benefits that removing exchange rate uncertainty will bring. If there was a common currency within Europe, businesses could be more confident about investment, as they wouldn't need to worry about what effects fluctuating exchange rates would have on them. This should lead to greater investment in the Euro area and flourishing intra-European trade. A single currency also allows freer movement of labour between member states. This, again, should lead to greater investment and trade in the Euro region and greater overall European prosperity.
By getting in early Britain can have greater political and economic influence in the creation and inevitable modification of the Euro zone. This would allow that the terms of the system are made as beneficial to her as possible. There is a danger that if Britiain is not actively involved and committed at this early stage, other nations will benefit from having created the terms of the union in their favour. This could leave Britain straggling behind if the union is a success, and marginalise her influence within Europe. Joining later, having sat out until the success of the project could be guaranteed, is a lower risk option, but would undoubtedly bring less benefits than the more risky early membership.
Although early signs are not good, the Euro has the potential to become a major global currency to rival the dollar, benefitting those within the Euro area. A resiliant, strong currency would benefit all member countries, including Britain.
Recent evidence has arisen which is claimed to prove the contrary, but Britain may well stand to lose out on a lot of foreign investment if she remains outside the Euro, harming her economic interests. I believe this will be the case if Britain does not join the single currency, and feel the aforementioned evidence does not disprove this. I am sure that businesses wanting to trade within Europe will be more likely to locate on the continent if they don't have to worry about exchange rates.
It is important to value and treasure our heritage, as that cannot be replaced. However, whether this should stand in the way of such a big issue I really doubt. I believe our culture to be strong enough to retain a real identity without the pound. Britain has many strengths, economically and culturally, that should enable her to grow and become more prosperous. But this would undoubtedly be made easier by membership in a successful Euro zone. However, whether or not this is attainable is really the issue - can the differences between the member's economies be overcome? Is convergence possible? Will the Euro be successful? I would tentatively suggest that the answer to these questions is, in the long term, yes. On this basis I suggest that it is best for Britain to join soon. There is a real risk of failure and there will undoubtedly be problems in the short to medium term, but I feel it is worth the risk.
In short, I think in principle Britain should join, but only when measures have been taken to ensure convergence and economic stability.
I think the idea of tests before entry is a sound one, but unfortunately it seems they have been designed for use as a political tool. I can only hope that Gordon Brown and Tony Blair fully appreciate how much more important this decision is than whether or not Labour are re-elected.
Discuss the Advantages and Disadvantages of European Monetary Union
Advantages of the European Monetary Union?
Membership of the Single Market
The single market benefits companies by making it easier & cheaper to do business in other EU countries. No customs tax is charged on goods that are sold or transported between member states. The EU also tries to make each market as similar as possible to ensure fair competition across national borders.
v Free Movement of Citizens:
European citizens have the freedom to live, work, study, and travel in any other EU country. Since 1995 alone, about 100,000 young Britons have spent time studying in another European country. (Source: www.bized.ac.uk)
v More Jobs:
It is estimated the 3.5 million British jobs are dependent on Britain's membership of the EU. (Source: UK Jobs Dependent on the EU)
v Money for Development:
The UK has been allocated a total of 15.5billion of European Structural Funds for 2000 - 2006. Over the same period, the UK has also been allocated 120 million for Fisheries Guidance and 961 million for Community Initiatives.(Source: EU development)
v A Louder International Voice
By working together in the EU member countries can ensure their concerns are heard, and taken more seriously, on the international stage. When the EU speaks it represents about 400 million people .This is more than the combined population of the United States & Russia. (Source: EU official website)
v Greater Protection for Workers:
The European Working Time Directive is an EU initiative designed to protect workers from exploitation by employers.
The directive lays down regulations on matters such as how many breaks an employee can take, and how many holidays they are entitled to each year. It also aims to limit the average time an employee can be compelled to work to 48 hours a week. (source:Bized)
v Greater Equality and Social Inclusion:
Through EU directives citizens are protected from employment discrimination on the basis of gender, sexual orientation, religion or belief, disability and age.
v Protection of the Environment:
The Environment knows no border and so the only effective way to tackle environmental pollution is through international co-operation and action. Britain has cleaner water, cleaner air and cleaner beaches because of action at the EU level
v Greater Co-operation in Law Enforcement:
EU co-operation is helping to crack down on terrorism, drug trafficking and organised crime.
Disadvantages of European Monetary Union?
v Too Many Rules and Regulations:
There are a great deal of rules and regulation, some of which don't seem sensible. This can make the EU inefficient and excessively bureaucratic. (source:Economics)
v Unaccountable to its Citizens
Decisions are taken a long way from the people, making it a poor example of democracy. People who are affected by EU decisions have little chance to make their voices heard.
v Concentration of Power:
EU institutions have too much power. They have taken away the right of individual countries to make their own decisions about economic and political matters. (source:Tutor2u.net)
v Speed of Integration:
The EU is moving towards more and more integration at a phenomenal rate with not enough thought or debate on the issues. The UK risks being swept by this tide of integration without plotting and following its own course in the interest of its own citizens.
v Loss of UK Sovereignty:
Membership of the EU has led the UK to lose its sovereignty. As a result the UK is no longer free to develop its own policies, make its own laws, or control its own economy in response to its own needs.
