NOTE: Free essay sample provided on this page should be used for references or sample purposes only. The sample essay is available to anyone, so any direct quoting without mentioning the source will be considered plagiarism by schools, colleges and universities that use plagiarism detection software. To get a completely brand-new, plagiarism-free essay, please use our essay writing service.
One click instant price quote
Should Britain Adopt the Euro? Introduction & Problem Statement. Research Objectives. The process of European integration began after the World War II when Europe and the entire world were divided into two systems. After the collapse of the totalitarian empire USSR the process of the European integration came to a qualitatively new level. The crash of the Berlin Wall which symbolized the long term confrontation in Europe started the new era in the integration process, the era of the Unified Europe.
Different members of the European community have different attitude towards the close integration. The unification of Europe is closely connected with a number of problems which derive from such unification. The Great Britain as well as Germany, France and Italy being the key players in Europe are very influential countries. It is historic tradition that the significant part of the European policy has been done in London.
The unification process is in a great measure depends upon the position of the UK authorities. The process of integration can not omit a number of problems when the national interests contradict to the interests of the unified Europe. These contradictions may arise in economic, cultural, historic and political spheres. Thus when Greece adopted the Euro it caused a very strong protest inside the country because the Greek Drachma was the oldest known currency in the world.
The monetary system of the UK was a very influential one. A number of currencies in the former British Colonies in Africa in this or that way are linked to the British sterling. At the same time it is obvious that the full functioning common economical union is impossible without the common currency. The main objectives of the current paper is to explore the positions of the EU regarding the Euro adoption by the UK, the attitude of London authorities towards the issue, the benefits and losses the adoption may bring to the UK economy. It is also important to explore the opinions of various political movements, citizens towards the Euro introduction both in the UK and in the EU. Literature Review.
The issue of the EU enlargement is the main issue of the European and world policy. The European Union has become the historic reality and if formerly the problems of the European policy were focused mainly on the process of preparation to the European unifications, current political issues are mainly concentrated around the EU policy, EU enlargement, interaction inside the European Union, joint policy in various aspects of the union construction. These issues include the frontier policy, labor market, common police system and the most important issue of the joint economy, the monetary policy. The main achievement in the matter of European integration was the establishing the European Economic and Monetary Union (EMU) which introduced a new monetary regime with a single currency for a large part of Europe (Hanspeter K. Scheller, p. 12). Hanspeter K.
Scheller reveals the information on the European Central Bank, its objectives and activities. The book gives the comprehensive information explaining the history of the European currency introduction. It marks the milestones of the changeover to Euro. It also describes the legal aspects of the European currency functioning.
The monetary sovereignty is the integral part of the sovereignty of any country. The book explains the role of EMU in the European economy regulation. According to the author Monetary sovereignty has been transferred to the supranational level under the terms and conditions of the EC Treaty, as amended by the EU Treaty. (Hanspeter K. Scheller, p. 28). This mechanism explains that the EMU is the result of the EU countries agreement and meets the interests of the Member Countries. The sovereign monetary system is the peculiar feature of the sovereign country.
The EU is a unique formation because the first time in the history of the society several countries agreed to transfer parts of their sovereignty, namely their monetary policies to the central body of the alliance. The monetary policy is governed by the Community law worked out in several documents and by the intergovernmental law. This is defined by the unprecedented level of the European integration. The uniqueness of the European formation is that the Member States succeeded to combine two independent aspect of the common economy. On one hand the Member States have the common centralized monetary system and on the other hand they have the national economies which are functioning independently. The adoption of the EU currency is the matter of the national decisions.
Twelve Member States have already adopted the common currency. They are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. The UK Government policy is to join the euro if Government, Parliament, and the people, in a referendum, all agreed that it would be the right thing to do (HM Treasury). The Great Britain worked out the Managed Transition Plan that regulates the perspectives of the UK regarding the European currency adoption. The early studies of pros and cons regarding the UK adoption of Euro were summarized by David Currie in his report The Pros and Cons of EMU. At the early stages of debates the advocates of UK sterling stated that by standing aside, the UK will avoid the instabilities that the single currency will cause, and will keep its present competitive edge (David Currie, p. 2).
The opponents to EMU in Great Britain stated that the future of the UK economical cooperation not in Europe with its well shaped markets and new post communist markets which brought more uncertainty by that time but in cooperation with the dynamically developing Pacific Rim countries (David Currie). The question of EU currency for the UK was the question of the sovereignty. There were speculations of economic dependence of the UK upon the political issues, i. e.
to what extends the economical category of the common currency may influence the political sovereignty of the UK. The opponents of the European currency stated that the British sterling was one of the strongest currencies in the world economy. There was a risk according to them to loose the British economical influence that was provided by the strength of the British sterling. David Currie states that the currencies of various countries should be competitive regarding their trends to inflate, i. e. regarding their exchange rate.
The competition is manifested in the benefits for the countries with the stronger currency. The common currency according to the author may destroy the basic principle of the free economy, the market approach. The advocates of the common currency state that there is no threat to the particular national economies if they are integrated very closely. The positive effects of the common currency according to David Curie would be the resulting ease of transactions across the EU. This would save both money and time (David Curie, p 7). Another negative issue of the common currency introduction according to David Curie would be that any national political (economical) crisis in one country would inevitably involve other countries.
Prior to taking the decision of joining the EMU Office of the Chancellor of the Exchequer has set out five economic tests which have to be met before Britain enters the EMU (UK Membership of The Single Currency). The summary of the tests is following: Are business cycles and economic structures compatible so that UK and others could live comfortably with euro interest rates on a permanent basis? The answer to this question was that the economy of the UK is healthier than that of other European neighbors. If the UK attempted to join EMU too soon, there is a risk that interest rates would be too low for price stability in the UK and that other measures would be needed to slow the economy.
Fiscal policy might have to be tightened, excessively, which could jeopardize the economic stability on which success depends. If problems emerge is there sufficient flexibility to deal with them? The exploration of the labor and product of the UK indicated that the state of the markets mentioned above is not sufficiently flexible to meet the new challenges. Would joining EMU create better conditions for firms making long term decisions to invest in Britain? According to the British scientists joining the EMU would enhance the investments into British economy. What impact would entry into EMU have on the competitive position of the UK's financial services industry, particularly the City's wholesale markets?' ' The British economists consider the EMU should benefit the UK.
In summary, will joining EMU promote higher growth, stability and a lasting increase in jobs? The British scientists considered Growth and investment should also be encouraged by EMU (An Assessment of the Five Economic Tests, ). In 2003 in the report of HM Treasury on Conclusions to the Assessment of the FIVE Economic Tests it is stated that a decision to join [EMU] now would not be in the national economic interest (UK Membership of the Single Currency, p. 228). At the same time HM Treasury adopted 3 rd Outline National Changeover Plan which regulates the process of transition to the European currency (Third Outline National Changeover Plan, June 2003).
This plan defines the steps of the changeover to the European currency. It was stated that the changeover would be conducted by the HM Treasury. The Plan schedules the procedures of the transition to Euro currency. The Plan marks the milestones of transition from sterling to euro.
The main stages...
Free research essays on topics related to: pros and cons, single currency, european currency, european integration, european union
Research essay sample on Should Britain Adopt The Euro Part 1
