Should we join the Euro?

There are many reasons for the UK joining the Euro.

For example, if UK joins the Euro, there is no longer any need to take into account the cost of exchange rates when the pound fluctuates against the Euro. Firms do not have to face this type of uncertainty any longer. For example, the Swedish car company, Volvo, claim that there will be a cost of $36.9million if they do not join the Euro. It is highly likely to be a similar situation for a British firm.

However, all the exchange rate costs that could be faced by a firm have not yet completely been eliminated. Although the pound would no longer have to fluctuate against the Euro as it will no longer exist, the Euro will still be on the global currency market, fluctuating against the Dollar and the Yen. The weaker the Euro may get, the worse the fluctuations will get.

Nevertheless, if the final aim is for all countries to unite and form a global currency, then this is a step forward in that direction. Also, almost 50% of UK’s trade is with Europe. Therefore it is good to at least eliminate this risk and lower a fraction of the costs incurred by the firm.

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If Britain joins the Euro, then there will be trade creation. This is when trade increases between the members of the EU, or any other trading bloc, due to economies of scale as the market has expanded. It cannot truly be a single market unless there is a single currency. With a single currency, UK will be able to export more as there is a bigger market i.e. there are 380 million consumers as opposed to 60 million. It is said to be calculated that two countries with the same currency would do thrice as much trade that with ...

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However, if the market gets too big, there may start to be diseconomies of scale. The UK is already within the same customs system as they are in the same trading bloc as the majority of the other European countries. Therefore, as the Conservative Party is asking, is it not enough to be part of the EU and not the Euro as well?

Prices can easily be compared if the currency of UK is in the Euro: there will be price transparency. For example, German cars can easily be compared to British cars for price difference. But it is not that difficult to calculate the price after exchange rate, so this is not really a valid reason. However, it is more efficient for businesses who can also easily shop around the continent for cheaper goods and services. This however really applies to luxury items. Consumers would not be comparing the prices of every single product they purchase.

Joining the Euro would have benefits in the field of inward investment. Britain is seen as a path into Europe by many foreign (non-EU) countries. Therefore it would attract more Foreign Direct Investment if our currency was also the Euro. The Japanese car company, Toyota, has threatened to pull out all production in the UK and therefore cut down at least 1 million jobs if we do not join the currency. However, it has been over two years and they still not have pulled out.

In order for the UK to join the Euro, it can take over 2 years to transfer all the money-related systems. Small British businesses would have to face a £6.2 billion cost for the transition metals.Tescos’ have calculated the number of workers that they would need; a value to upto over £400.

UK would have to give into British Sovereignty and forgo the power our Chancellor has and the policies that can be made. As there are no longer any monetary policies against the Euro, the ‘inflation rate’ tool will no longer be of any use. It must happen relatively fast as u will not be able to think about what u were saying.

If the UK joins the Euro, depending on the firms’ efficiency, it will affect the competitiveness. If the firm is efficient in the first place, then it will continue to maintain a simple standard. If the country is not that visible then u would only see us?

We have also seen from the patience into that now.

Personally, I do not think that UK should join the Euro. This is because before it’s possible to survive in the position and this has not changed since. For the ease of comparing prices, that can easily be done by anyone. If MNC’s were attracted to London, then they should consider Britain as a compeletely different economy. They should be able to deal with Britain in pounds as well as they are going to have to pay for the tickets for another currency such as the Yen. Also, our Chancellor, Gordon Brown has so far been doing a really good job with the treasury and it may not be healthy for the British economy to change its infrastructure and hand over the park to himself.