Should Britain join the Euro Zone?
Answer:
It is easy to get caught up in unjustified patriotic arguments.
Economically the question is much more interesting. Gordon Brown, when he became Chancellor of the Exchequer in 1997, set out five 'golden rules' that must be met in order for Britain to then hold a referendum on the matter. Those five rules were:
1) sutainable convergence between Britain and the EU;
2) sufficient flexibility to cope with the economic change;
3) non-negative effect on investment;
4) non-negative effect on our financial services industry;
5) non-negative effect on employment.
In June 2003, the rules were tested and given a (+) in favour or (-) against:
1) +
2) -
3) +
4) + and -
5) -
Only when all these indicators are positive will the country be able to vote on entry, and then the arguments become political. Or patriotic again.
Hope that helps.
its inevitable I'm afraid.
what your asking has been a major source of economical and political debate for many years now. For you to fully understand it, maybe check this link http://www.adb.org/documents/erd/working...
ultimately it's a question of convenience vs. soveriegnty
This is a big economic reserach topic. The theory that deals with this is called Optimum Currency Area theory advanced by Mundell (a recent Nobel prize winner). The main issue is whether the UK is subject to similar supply (technology, population, oil prices) or demand (monetary policymaking for instance) shocks vis-a-vis the other economies it wants to join the currency union. If these shocks are 'asymmetric' meaning countries experience opposite direction of output movements due to these shocks, being part of the monetary union hinders them to use monetary policy (to change short term interest rates or to devalue/revalue currency) to correct imbalances in current account in the short term, as the UK will have to delegate its monetary policy to the Frankfurt based European Central Bank.
In theory, even if the UK joins the Eurozone, and faces asymmetric shocks vis-a-vis the other member countries there may be automatic stabilizers. As long as the labour markets are flexible (i.e. flexible wages or mobile labour) negative effects of asymmetric shocks can be corrected. If labour markets are not flexible, and if the shocks are asymmetric, there is, in principle, no significant economic reason for the UK to abondon its own sovereign currency. Given that the economic structure of the UK very distinct from the rest of the Euro area, (UK specialized in financial services, Germany and France manufacturing for instance) at least at this stage, there is little motive for the UK to join the Euro area.
You may want to consult several books on the issue, though in my view most accesible and rigorous one is by Paul De Grauwe 'Economics of Monetary Union, Oxford University Press.
Yes, after all we are in the European Union and in the European Continent. Lest not forget this
Eventually, but there's no hurry.
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