The UK and the euro - better out than in?
- Document type
- Leach, Graeme
- Institute of Directors
- Date of publication
- 1 April 1999
- Trends: economic, social and technology trends affecting business
- Business and management
- Material type
A paper argues that the UK should not join the euro, on both economic and political grounds. The euro is not politically inevitable due to significant hostility to it within UK society. It is not economically inevitable due to qualitative differences between the UK and European economies that make long-term convergence unlikely. Only 14% of GDP and 46% of export earnings are associated with trade with euro members. Euroland is in danger of long-term deflation. The UK will not make economic gains through the lower interest rates in Euroland. Previous experience has been that fixed exchange rate regimes are economically damaging. The use of a single currency is not necessary for the UK to trade freely in the single market. The impact of the euro on foreign investment will be at best marginally positive and more likely negative. Membership in the euro will not improve the City's status as a global financial centre and may well be damaging. Monetary union will lead to increased pressure for fiscal and tax harmonisation, and the UK will be required to make massive disbursements to weaker euro-member states. Finally, the euro will inevitably lead to increased pressure for political unification of the EU into a super-state.
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