The five economic tests

The five economic tests
Document type
Article
Author(s)
Leach, Graeme
Publisher
Institute of Directors
Date of publication
1 August 1999
Subject(s)
Trends: economic, social and technology trends affecting business, Trends: economic, social and technology trends affecting business
Collection
Business and management
Material type
Reports

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An article discusses the “five tests” laid down by Gordon Brown as Chancellor of the Exchequer for the UK to join the single European Currency. It is argued that the UK economy is essentially different in character from those of other Euro nations, and that any permanent economic convergence is unlikely. There is insufficient flexibility to deal with economic problems within the Eurozone other than by politically unpalatable fiscal transfers to poorer nations within the Eurozone. Foreign direct investment would not be increased were the UK to join the Euro, and part of the UK's attractiveness to investors is because it is not within the Eurozone. The competitiveness of the City of London relative to other financial sectors has not been damaged by the UK staying out of the Euro. Finally, the advantages of currency stability relative to other European nations would be outweighed by instability relative to the US dollar and the negative effects of fiscal harmonisation.

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