Should The United Kingdom Adopt The Euro?

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Should the United Kingdom Adopt the Euro? Since the inception of the euro in 1999, possible entry of the United Kingdom into the Eurozone has been a highly controversial topic of debate (Hallett, 2002). Compelling arguments have been made both in-favor and against UK entry, focusing not only on the economic aspects, but also on political grounds. This paper will first provide a brief overview of the Eurozone, followed by an examination of three main arguments both for and against UK’s entry into the Eurozone. The goal of this paper is not to answer the question of whether the UK should adopt the euro, but rather, to provide contrasting viewpoints of each argument. Overview of the Eurozone Dating back to the 1960s, the idea of an…show more content…
As of 2014, nineteen of the twenty-nine members of the EU have adopted the euro, thus becoming part of the Eurozone (European Commission, 2014). According to the European Commission (2014): All EU countries are part of the economic and monetary union to some extent, but not all of them use the euro. Two countries (Denmark and the United Kingdom) opted out of the euro at the time of the Maastricht Treaty. Others have not yet met all of the economic criteria required by the Maastricht Treaty, regarding for instance the stability of prices and exchange rates, to adopt the euro. (p. 4) Alleged Benefits of the Euro There are three main elements to the alleged economic benefits provided by Eurozone membership, they are: (1) the reduction of transaction costs of converting currency; (2) the reduction of exchange rate risk; and (3) increased transparency in price comparison (Minford, 2004, 2008; Mulhearn & Vane, 2005). Transaction Costs A single currency means that currency exchange, and the transaction cost involved, would no longer occur which would save resources (Brothwood, 2002; Huhne, 2001; Johnson, 2000; Lane, 2001; Minford, 2004, 2008; Mulhearn & Vane, 2005). According to the EU (as cited in Minford, 2008), the savings that is realized through the adoption of the euro is around 0.4% of GDP (Johnson, 2000; Minford, 2004, 2008). However, Minford
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