Discuss the economic advantages and disadvantages to the UK of participation in the
European single currency (Euro). Will British businesses be better or worse off if the
country decides to participate?
Introduction of Euro in the world’s monetary union is a milestone. Eleven countries were going to create EMU at the beginning, now there is a long queue to join in EMU. Most of the EMU members get more advantage then disadvantage to join in Euro. Euro creates a large market in the Eurozone. Three core members of EU (Great Britain, Sweden and Denmark) still not participate in European single currency. Many European countries are very excited to join in EU, some of them decided to implement European rate mechanism- 2 (ERM-2). If Britain accept euro then the country poses both advantage and disadvantage. Productivity and living standard will increase if Britain joins in Euro. If they will not join, they have chance to fall further behind.
European Union is the union of twenty-seven countries. Most of the members of European Union come to join in EU from European Continent. The origin of European Union associated with foundation of European coal and steel community. Treaties of Rome or Schuman declaration formed European Economic Commission. Both these bodies are essential parts of European Union.
Rome treaty signed in 1957 for creating European Economic Community (EEC). Belgium, France, Netherlands, Luxemburg, West Germany and Italy are the core six members of EEC. During that period, West Germany and Netherlands built nexus among them by the help of European Steel and Coal Community. Among the six countries of EEC, they allowed free movement of labour and capital. Free trade also allowed. They abolished internal tariffs among them and set external tariffs. In enlargement stage, UK, Denmark and Ireland become member of EEC. Greece, Spain and Portugal joined in EEC in 1981 and 1986 respectively. After this enlargement stage, the commission president Jacquas Delors signed single European act. In 1992, the Maastricht treaty signed to establish European Union. According to Sloman and Sutcliffe (2004, p.563) “May 2004 marks the latest expansion, with 10 new members joining. These are Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Solvakia and Solvenia”.
European single currency:
Euro is the single currency among the countries that include in European Union. Other countries also adopt the single currencies. In 1932, the chairman of German Bank Hans Fϋrstenberg gave the idea about European currency to set up European central bank. The idea came about euro currency among the countries before Second World War. Idea of European integration became stronger after Second World War. Some sequential incidents happen after the war. In 1950, the European Coal and Steel Community (ECSE) established, Rome treaty signed in 1957 and at the same time, European Economic Community formed. Rome treaty and Economic Community both made the path for euro to lunch. European monetary system established for full monetary support in 1979. According to Solman and Sutcliffe (2004, p.741) “Details of the path towards EMU were finalised in the Maastricht treaty, which was signed in February 1992. The timetable for EMU involved adaptation of a single currency by 1999 at the latest”. Therefore, Maastricht treaty made the path for euro easier. Before joining the euro currency, each country fulfilled five criteria, which set by the European central Bank. The eleven members of EU out of fifteen could fulfil the criteria and joined in Euro. Sweden and Greece could not fulfil the criteria. Later 2001, Greece joined in Euro. Euro came in to the market on 1 January of 1999 but the bank note and coin were introduced 2002. National currency of the European countries withdrawn from market due to introduce euro notes and coin.
Road to EMU
European Monetary Union proposed by Delors committee report....
References: Sloman J & Sutcliffe M (2004). Economics for Business, 3rd edn, NJ: Pearson Education
McAleese D (1997). Economics for Business, Harlow: Prentice Hall
Please join StudyMode to read the full document