ECONOMICS Should the UK join the Euro? By Ali Jasim, Khizar Zaheer & Mumbitsm Iqbal

Benefits of joining Euro

Reduced Transactions Costs No costs of converting one currency to another No costs of converting one currency to another Higher costs in currency conversion if business outside the euro engage in foreign trade frequently Higher costs in currency conversion if business outside the euro engage in foreign trade frequently

Uncompetitive Exports Separate currencies mean that countries have particular exchange rate level which makes it hard for businesses to compete with businesses in other countries Separate currencies mean that countries have particular exchange rate level which makes it hard for businesses to compete with businesses in other countries A single currency reduces the problems of having uncompetitive exports A single currency reduces the problems of having uncompetitive exports

Ease Of Price Comparisons Consumers find it easier to compare prices of goods sold by different countries Consumers find it easier to compare prices of goods sold by different countries Businesses will not be able to charge different prices in different countries as easily as when separate currencies existed Businesses will not be able to charge different prices in different countries as easily as when separate currencies existed

Greater Economies Of Scale Being in the eurozone encouraged greater trade with other countries in the eurozone Being in the eurozone encouraged greater trade with other countries in the eurozone Firms are able to now expand and they will benefit from increased efficiency (economies of scale) Firms are able to now expand and they will benefit from increased efficiency (economies of scale)

Costs of joining Euro

Costs Of Preparation Joining the euro requires a large amount of expenditure in switching from the old currency Joining the euro requires a large amount of expenditure in switching from the old currency Money needs to be spent training staff dealing with money about the switchover and the public will have to be educated in new currency Money needs to be spent training staff dealing with money about the switchover and the public will have to be educated in new currency

Loss Of Control Over Interest Rates The interest rate for the euro is set by the European Central Bank The interest rate for the euro is set by the European Central Bank Any one country can no longer set its own interest rate at the level it would like for its economy, this means that the UK would have to give control of monetary policy to the ECB Any one country can no longer set its own interest rate at the level it would like for its economy, this means that the UK would have to give control of monetary policy to the ECB

Use Of Exchange Rate Allowing the exchange rate to fall in value is a way of boosting economic growth because it leads to a country’s exports being more desirable in foreign countries as they appear cheaper Allowing the exchange rate to fall in value is a way of boosting economic growth because it leads to a country’s exports being more desirable in foreign countries as they appear cheaper This is not possible in a single currency This is not possible in a single currency