Economy in EU - Should the UK Join the Eurozone? There has...

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Should the UK Join the Eurozone? There has been recent speculation in the financial world indicating that the United Kingdom will become part of the Economic and Monetary Union within a short time. The UK entry into the Eurozone would be a difficult task. The main aim of this paper is to discuss whether it would be wise for the United Kingdom to join the European Monetary Union after so many years of abstinence. Would it benefit the United Kingdom to become part of the Euro currency in order not to continue along a lonely road? Could the European Central Bank be the refuge Britain has been longing for economically since its reputation has risen during the financial crisis? These questions have been debated in Britain for many years. I will briefly analyze if the United Kingdom were to join the Eurozone, the possible consequences if it does not join the Eurozone and the Eurozone’s view on a potential British participation into their financial world. Hypothesis: United Kingdom Enters the Eurozone Some factors to consider when discussing the United Kingdom entering the Eurozone are the structural differences of both the UK and the European Union. Three important differences are: the size of services and production, the elasticity of the work force and the private sector financing. These three aspects help determine the EU fiscal policy after the entry of the United Kingdom, the effects of the United Kingdom entering the Economic and Monetary Union (EMU) and the role of the sterling. Britain has a large financial sector and had a big housing boom. The economic crisis dealt the UK a hard blow in both areas. Both are facing hard times. Its monetary reputation and strength in the financial sector is severely wounded and the housing industry is quickly shrinking. The country has managed to stay afloat over these tough times compared to countries in the Eurozone. Spain and Italy have been craving Britain’s strength while they have struggled with high wage costs and low productivity. But is the United Kingdom secretly wishing it were safe inside the Eurozone? Britain’s liberal financial capitalism has always been looked upon as admirable compared to the Eurozone country’s favored social market model. However, the global crisis may have divulged the delusion: the framework of Britain’s macroeconomic policy may simply not survive this
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crisis. There may be a serious risk of a real sterling crisis in the near future. The financial common market belief is that the entry of the United Kingdom into the EMU will bring about a depreciation of the pound. However, one may argue that the entry of the United Kingdom into the EMU may actually optimize the value of the sterling. One of the reasons why the United Kingdom decided not to join its European neighbors years ago
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This note was uploaded on 01/27/2011 for the course ECON 101 taught by Professor Luis during the Fall '10 term at Superior University Lahore.

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Economy in EU - Should the UK Join the Eurozone? There has...

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