ECONOMICSECONOMICS Should the UK join Should the UK join

the Euro?the Euro?

By Ali Jasim, Khizar Zaheer & Mumbitsm Iqbal

Benefits of joining Benefits of joining EuroEuro

Reduced Transactions Reduced Transactions CostsCosts

No costs of converting one No costs of converting one currency to anothercurrency to another

Higher costs in currency Higher costs in currency conversion if business outside conversion if business outside the euro engage in foreign trade the euro engage in foreign trade frequentlyfrequently

Uncompetitive ExportsUncompetitive Exports

Separate currencies mean that Separate currencies mean that countries have particular exchange countries have particular exchange rate level which makes it hard for rate level which makes it hard for businesses to compete with businesses businesses to compete with businesses in other countriesin other countries

A single currency reduces the problems A single currency reduces the problems of having uncompetitive exportsof having uncompetitive exports

Ease Of Price Ease Of Price ComparisonsComparisons

Consumers find it easier to Consumers find it easier to compare prices of goods sold by compare prices of goods sold by different countriesdifferent countries

Businesses will not be able to Businesses will not be able to charge different prices in different charge different prices in different countries as easily as when countries as easily as when separate currencies existedseparate currencies existed

Greater Economies Of Greater Economies Of ScaleScale

Being in the eurozone Being in the eurozone encouraged greater trade with encouraged greater trade with other countries in the eurozoneother countries in the eurozone

Firms are able to now expand and Firms are able to now expand and they will benefit from increased they will benefit from increased efficiency (economies of scale)efficiency (economies of scale)

Costs of joining Costs of joining EuroEuro

Costs Of PreparationCosts Of Preparation

Joining the euro requires a large Joining the euro requires a large amount of expenditure in switching amount of expenditure in switching from the old currencyfrom the old currency

Money needs to be spent training Money needs to be spent training staff dealing with money about the staff dealing with money about the switchover and the public will have switchover and the public will have to be educated in new currencyto be educated in new currency

Loss Of Control Over Loss Of Control Over Interest RatesInterest Rates

The interest rate for the euro is set The interest rate for the euro is set by the European Central Bankby the European Central Bank

Any one country can no longer set its Any one country can no longer set its own interest rate at the level it would own interest rate at the level it would like for its economy, this means that like for its economy, this means that the UK would have to give control of the UK would have to give control of monetary policy to the ECBmonetary policy to the ECB

Use Of Exchange RateUse Of Exchange Rate

Allowing the exchange rate to fall in Allowing the exchange rate to fall in value is a way of boosting economic value is a way of boosting economic growth because it leads to a country’s growth because it leads to a country’s exports being more desirable in exports being more desirable in foreign countries as they appear foreign countries as they appear cheapercheaper

This is not possible in a single currencyThis is not possible in a single currency