MINI CASE 2: Will the United Kingdom Join the Euro Club?
When the euro was introduced in January 1999, the United Kingdom was conspicuously absent from the list of European countries adopting the common currency. Although the previous Labor government led by Prime Minister Tony Blair appeared to be receptive to the idea joining the euro club, the current Tory government is clearly not in favor of adopting the euro and thus giving up monetary sovereignty of the country. The public opinion is also divided on the issue.
Whether the United Kingdom will eventually join the euro club is a matter of considerable importance for the future of European Union as well as that of the United Kingdom. The joining of the United Kingdom with its…show more content… Besides, UK can attract many investor s from others because it has a plenty of advantages such as abundant productive workforce, independence of the monetary and flexibility in labor market. Price transparency is also a potential benefits for UK. There is a severe competition between local firms about their price of goods. And it’s absolutely a positive advantage for costumers in choosing goods with a reasonable price. Some companies can minimize their production costs with a cheaper price of their materials. Furthermore, UK can improve the inflation performance. In UK, CPI is allowed to increase up to 3% but in Euro, its targeted inflation is close, but not more than 2%. The last but not least, it is rising importance of Euro. Nowadays, Euro currency plays an important role in international trade. And it can be able to replace dollar one day in period of globalization. Because there are more and more other potential members participate in Euro club. Thus, this ensures that the Euro’s economy is much larger than US one. The instability of dollar and rising national debt in US also affect to dollar currency.
About costs of adopting euro, initially UK has to face to the sensitivity of changes in interest rates. Because house ownership in UK is the highest in Euro club, any changes in interest rates can rapidly impact their economy. Secondly, adopting euro is constraint the