Wednesday, February 12, 2020
Should the UK join the euro Essay Example | Topics and Well Written Essays - 1000 words
Should the UK join the euro - Essay Example Thus it means giving up the traditional pound for a new European wide single medium of exchange that is already in circulation. Moreover, this would also facilitate the adoption of a common EU monetary policy. That is why the British government too is unhappy with the idea because it entails transferring power and economic decision making to the EU bureaucracy. However, the government is not fundamentally opposed as long as there are demonstrated economic benefits of doing so. Also, if it does decide to join, it is a tough decision to make as to precisely when to join the bandwagon because this could have economic consequences too. Then there is the period of turbulence to endure before things settle. The main benefits of joining are due to the removal of economic barriers that hinder trading. A common currency does away with exchange rate fluctuations and transaction costs. This for example, makes investment more attractive in the UK. So we have the potential to gain in the areas of trade and investment but these benefits must be weighed against the effects of the loss of autonomy over macroeconomic policies and other complications. By not joining though, the UK risks being marginalised within the EU. And, the euro currency is a growing in strength. It is now ââ¬Å"the worldââ¬â¢s largest by cash valueâ⬠(Stevenson, 2009). A successful European wide monetary policy requires that there is economic parity or at least a convergence in the economic circumstances between the euro-adopting states. For instance, if the rest of the EU fares better than the UK during the looming recession, interest rates are likely to be high and this would exasperate the financial difficulties of UK businesses and cause even lower output. On the other hand, low interest rates can cause higher inflation. This shows that the decision of joining and when to join is very much tied to concerns over the level of convergence and interest rates and the impact this could have
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