The first literature review is on the book, The UK and the Euro by Paul Temperton. In this book Temperton clearly explains the case for and against the UK adopting the single currency. He explains what the possible outcomes of each course of action will be and details all the main issues of controversy while still delivering an impartial, unbiased approach to both sides of the argument. His style is clear, providing concise information for the layman with the use of diagrams to back up any economic theories mentioned. He introduces quotes and opinions from top British MP’s, including the UK’s own Mr Gordon Brown and shows how the Chancellor of the Exchequer continues to be undecided on the matter.
The second review is for the book, The Euro: Yes or No? by Anthony Browne. This book is laid out in a simple format and provides an insight into the effects of joining or not joining the single currency. Unlike the first review it states the likely economic costs and benefits for the firms as well as the individual not just the economy as a whole, like in the first book. The book is structured into sets of questions in each chapter and has sub-headings of Yes and No with written explanations underneath.
Both books offer an introduction to the Euro and go on to describe what, due to economic theory, the arguments for and against the UK adopting the Euro.
The one main difference between the two are that the first book by Paul Temperton was published in the September of 2000 before each of the member countries started using the Euro as legal tender. The second however was published in March of 2003. And therefore the author was able to develop a further argument because the Euro is in use. Anthony Browne has therefore made a start, from any available facts, to discuss how the Euro is fairing, addressing any implications for the UK if they were to continue to stay out of adopting the Euro. It provokes the question, Is the UK paying an economic price for staying out of the Euro?
The reviews of these two books have allowed me to formulate some research questions. Should the UK join the Euro? Or should he UK continue to ‘opt’ out?
The methodology I have used is qualitative and is aimed to provide a critical approach in my interpretation into my case study. In this case I have gained data from documents, literature and government reports. The reports are the ones issued by the government to give some perfect information for the citizen. The documents are Treaties such as, the Maastricht Treaty. All data methods were secondary because time was a factor. Conducting surveys would have been a primary way of collecting opinions of the citizens of the UK. However in this case it ran the risk of being biased as time permitted me to take a fair sample across the country. I looked at using opinion polls from the BBC’s website, who have currently issued an online vote, however this would also be biased because only those with access to the Internet and those who ‘hit’ the site would be able to vote or have any knowledge about the poll. Interviewing British MP’s was a method I had considered but I could not expect the MP’s to give up their time from a busy schedule. Therefore text analysis was the best option. This way I could still explore, for example, an MP’s view by analysing the reports on the issue that he or she may have written. The disadvantages with this way of data collection, secondary, is that it can be biased and contain assumptions.
Analytically I broke down the title into my objectives to tackle what literature I needed to review. From this I gained my research questions, which I could then go on to formulate my methodology. The process could then move on to that of a conclusion.
In my analysis of the two books I came up with one clear argument. The case for shows there are some advantages, which have a very sound basis. The first is that if the UK joined the Euro, exchange rate stability would be achieved because any currency fluctuations would vanish. There will also be the advantages of currency conversions because if the UK held the same currency as the twelve member countries there would be no need to convert currencies this would have economic benefits for both individuals and firms by reducing their costs of trading abroad. The third advantage would mean that an effective ‘free trade area’ had been created with free movement of factors of production and firms would enjoy economies of scale. If the UK joined it would have the same interest rate as all member countries, set by the European Central Bank. Currently the Eurozone has a lower level. However these benefits are far from certain.
The decision to stay out of the Euro relies on many factors. The first being that the UK’s economy is out of sync with the rest of the Eurozone and would therefore lose the flexibility to change the UK’s fiscal and monetary policies to respond to changes in the economy because one central bank would control these affairs. Much of the UK’s inward investment comes from the US and therefore this may be affected in joining. Since the introduction of the Euro unemployment has risen significantly in France and Germany while falling in the UK. The UK’s economy has grown twice of that of the Eurozone showing in the European Commissions growth figures. Spending would have to decrease within the UK to keep the budget deficit below the 3% requirement. The citizens of the Eurozone have also incurred a price increase during the changeover period, which is not something the UK can afford to have.
The underlying question is whether or not the positives outweigh the negatives. If the UK stays out it runs the risk of increased competitiveness against the Eurozone and there is the question as to whether the foreign investors will decided to stay out of the UK. However the are also drawbacks, if it were to join it could de-stable the UK’s economy with consistently wrong interest rates, high levels of bureaucracy and a poor trade relationship with the US.
I feel that while the Euro has still yet to prove its self there are still high levels of uncertainty as the Euro still runs the risk of failing and once the UK joins it will be forever. It is unlikely that the UK will be able to reject the new currency forever whilst still being part of the European Union. However I will be happy to go with whatever the government decides for the announcement on the 9th of June, as I feel a referendum is costly and may only reflect votes to that of a loss of sovereignty not in terms of the economic costs and benefits.
