Disadvantages and Advantages of a Single Currency
Discuss the arguments for and against the UK joining the European single currency.
The European single currency is a common legal tender currently used by 17 of the 27 member states of the Euro zone. This single currency is known as the Euro which was first introduced as an electronic currency on 1st January 1999, where it could only be used for cashless payments. Then later on in 2002, the euro became a physical state, notes and coins. The intention of creating a single European currency was in order to make it easier to trade across the EU, excluding the problems of exchange rates. However, there are two of the original member states that still to this day do not use the Euro; Denmark and the United Kingdom. They both agreed an ‘opt-out’ in the treaty which then excluded them from participation in the third stage of the European Monetary Union. (EMU) For the remainder of the member countries that currently do not use the single currency, they will need to meet certain conditions before changing their current money into Euros. These certain conditions would be known as the convergence criteria, which is a mixture of economic requirements that EU members must meet before entering the third stage of the EMU. Over many years there have been several debates as to whether or not the UK should enter the European single currency. With regards to this debate there are many advantages for the UK to join the single currency that we should take into account. For example, if the UK was to enter this scheme then one advantage would be that the single currency should put an end to the days of currency instability in Europe by fixing exchange rates. This action would create reduced exchange rates for UK business as well as tourists. By reducing the exchange rates, ‘it will cause the elimination of the risks of unforeseen exchange rate revaluations or devaluation, but also it means that no one country can devalue its currency against another member country to increase
The European single currency is a common legal tender currently used by 17 of the 27 member states of the Euro zone. This single currency is known as the Euro which was first introduced as an electronic currency on 1st January 1999, where it could only be used for cashless payments. Then later on in 2002, the euro became a physical state, notes and coins. The intention of creating a single European currency was in order to make it easier to trade across the EU, excluding the problems of exchange rates. However, there are two of the original member states that still to this day do not use the Euro; Denmark and the United Kingdom. They both agreed an ‘opt-out’ in the treaty which then excluded them from participation in the third stage of the European Monetary Union. (EMU) For the remainder of the member countries that currently do not use the single currency, they will need to meet certain conditions before changing their current money into Euros. These certain conditions would be known as the convergence criteria, which is a mixture of economic requirements that EU members must meet before entering the third stage of the EMU. Over many years there have been several debates as to whether or not the UK should enter the European single currency. With regards to this debate there are many advantages for the UK to join the single currency that we should take into account. For example, if the UK was to enter this scheme then one advantage would be that the single currency should put an end to the days of currency instability in Europe by fixing exchange rates. This action would create reduced exchange rates for UK business as well as tourists. By reducing the exchange rates, ‘it will cause the elimination of the risks of unforeseen exchange rate revaluations or devaluation, but also it means that no one country can devalue its currency against another member country to increase