Whether the UK Should Join the Euro Institution Affiliates - Research Paper Example

An investigation into whether the UK should join the Euro Affiliates Introduction The euro is the one currency common by 19 of theEuropean Unions States, which all together form the euro zone. The unveiling of the euro in 1999 was a primary step in European unification. It became the new official currency for countries, and It has too been a unit of its main successes. More than 337.5 million EU Person in 19 countries uses euro now and enjoy its benefits (European Commission, 2015). All Members Sates of the European Monetary Union, (EMU) will have a right stage of economic integration to a single market. They relate to planning powers in economic and financial policies (European Commission, 2015). Treaty as objectives of EMU are, what is must meet the requirements of the Member States to adopt the euro. These conditions are known as "convergence criteria" (or "Maastricht criteria"). These include low and stable inflation and exchange rate stability. It sets interest rates from the European Central Bank for the entire euro area. However, these sound monetary policies to the British economy may not be. Therefore, the United Kingdom could cut interest rates very quickly. Also, "Bank of England" was able to follow quantitative easing to stimulate economic activity. If the United Kingdom in the euro, it would not able to do it (Economics Help, 2011). It has taken effect on the political situation in the United Kingdom. For example, the value of the United Kingdom to join the euro, while the primary benefit of a single currency would be to reduce transaction costs 0.26%. Whereas benefits for the United Kingdom to stay outside the euro is only 0.74%. It means that people regard the option of joining the euro will undermine the political situation in the United Kingdom (Nieboer, 1998). However, should point out in the crossing that the implicit nature of political Union, Monetary Union plans related to recent economic arguments (Minford, 2002). This project will look at the Euro, its benefits, and drawbacks and examine the question of whether the UK will benefit from joining or not. 1.1 Research Questions i. What are the advantages of joining the euro? ii. What are the disadvantages of joining the euro? iii. Under what conditions might the UK join the Euro? iv. When might the UK join? v. Does the British public support joining the Euro? 2 Literature Review 2.1 Advantages of joining the euro Euro currency means that there will be no additional cost required in changing currencies, and these will be significant for investors in Europe. Studies have shown that the adoption of the Euro will result in an increase of 6% revenue from tourism (Andrew & Wincoop, 2000). Secondly, with a single currency it will be easier to compare prices of raw materials in different European countries and buy the cheaper one. Additionally, it will help eliminate the uncertainty of exchange rates, which can destroy exports profitability. Exchange rates also determine investors confidence; a single currency will result in increased trade and overall economic growth (Andrew, 2014). 2.2 Disadvantages of joining the euro The UK housing market is very sensitive, meaning it would lose control over monetary policy. Most Britons buy their houses, whereas others rent houses in Europe, and thus its interest rates suit its economy. Joining Euro means that the UK would adopt Europes interest rate, and a small interest rate increase will have an effect on consumer spending (Andrew, 2000). Secondly, once the UK joins the Euro it does not have the freedom to devalue the currency when it is uncompetitive. For instance, this has been a significant problem in countries such as Greece, which have seen an increase in inflation and reduction in production. 2.3 Conditions for joining the euro According to the Economic and Monetary Union, the members must fulfill the economic and legal requirements before joining the euro. The economic conditions ensure that their countrys economy is ready for single currency adoption without the risk of disrupting other members (European Commission, 2007). Additionally, UK must make the necessary changes to national laws; particularly govern its central bank to be compatible with the treaty. 2.4 When might the UK join? According to the Euro Treaty, once the UK has requested for a membership, the European Commission assesses whether the country has met all the convergence criteria. It then publishes their decisions relevant to convergence reports. 2.5 Public Opinion Many websites have conducted public surveys asking people to vote "Yes", "No" or "Dont know". Although, the results vary in various studies, it is clear that the British are Eurosceptic. Monitoring different public opinions across Europe for the last few years, the Commission noted that the UKs population has less affinity to the euro than that of most other European countries (Bush, 2001) 3 Methodologies The study adopted the stratified random sampling design since our target population was heterogeneous. A sample of 30 people was used. The respondents were randomly selected from the whole population in Portsmouth. The respondents had different demographic characteristics such as age, gender, and so on. The study will make use of Questionnaires to collect data. Questionnaires are economic, and it allows collection of data from a large population. It allows the respondents to fill the questionnaires in their appropriate time. Additionally, secondary sources of data, such as websites were also used. The research focused on four main areas including political statuses, businesses, and economy and consumer impact of the UK joining the Euro. 4 Findings From Figure I. below, they found out that out of the 30 respondents who participated 57% were female and 43% were male. This indicated that the ratio of women was higher compared to that of male respondents. Figure 1: Gender of the respondents The researcher sought to find out the age of the respondents in the field of study. Figure 2 shows respondent aged between 25-34 years were more engaged in the study, 38%. Only 6% out of the 30 respondents were above the age of 55 years. Figure 2: Analysis of respondents according to age Figure 3 shows that majorities of the respondents (36%) have attained a college diploma of education as presented in figure 3. Therefore, this indicates that these respondents have possibly studied some courses leading to effective understanding impacts of joining or not joining the euro. Figure 3: Showing analysis according to level of education Figure.4 shows that a majority of the people believes that the government should hold a referendum. Figure 4: Should the government commit to holding a referthe Eurozone whether to join Eurozone. Figure 5 indicates that 46% of Portsmouth population would vote to stay outside the Eurozone. Figure 5: How would you vote in a referendum on the UK’s membership of the Euro? Figure 6shows the distributed Impact on UK Political Status of Joining Euro. The majority of the respondents (73%) indicates that joining the euro would have a negative impact on the political status. Figure 6: Distributed Impact on UK Political Status of Joining the euro Figure 7shows the distributed Impact on UK Economy on joining the Euro. The majority of the respondents were neutral on the economic impacts of the UK joining the euro. Figure 7: Distributed Impact on UK Economy of the Joining Euro Figure 8 shows the distributed Impact on UK Businesses on Joining Euro. About 40% of the participants believe that the UK joining the euro will have positive impacts on their businesses. Figure 8: Distributed Impact on UK Businesses on Joining Euro Figure 9 shows the distributed Impact on UK People on joining the euro. 40% of the respondents are that the UK joining the euro will have positive effects on the people. Figure 9: Distributed Impact to the UK People on joining euro 5 Discussion The aim of the study was to investigate whether the UK should join the Euro. The study also sought to examine how the joining euro will affect the political status, economy, business, as well as people in general. The results indicate that people think that the option of joining the euro will undermine the UK political status. In considering the impacts on UK business, a majority of the respondents believes it has a positive effect on business. Joining Euro means that there will be no extra cost required in changing currencies, and these will be significant for investors in Europe (European Commission, 2002). However, the results of whether joining the euro will have an impact on the UK economy, many participants were neutral. Even though there was a slight difference in whether it will have positive or negative consequences for the people, many believe it will have an adverse impact. 6 Conclusion Currently, UK is divided over the euro issue. The study has shown that there are slightly more disadvantages if the UK joins Euro. 6.1 Recommendations A national survey will be required to make a comprehensive report on the euro issue. However, the survey should not be just a simple "Yes", "No" or "Dont know" style. It would be much more informative and objective if the questions asked the most pressing issues to the nation. 6.2 Scope and Limitation of the Study Some respondent was not willing to give the appropriate information. The study used a conservative sample size of 30 in Portsmouth to address this limitation. References Andrew, L. (2014). After 2020, all EU members will have to adopt the euro. The Telegraph. Retrieved on July 3, 2015, from http://www.telegraph.co.uk/finance/economics Andrew, R. (2000). The effect of common currencies on international trade: a meta-analysis. Retrieved on July 3, 2015, from http://faculty.haas.berkeley.edu/arose/meta.pdf. Andrew, R. and Wincoop, E. (2000). National Money as a Barrier to International Trade: The Real Case for Currency Union. Retrieved on July 3, 2015, from http://www/haas.berkeley.edu/~rose/. Bush, J. (2001). The Economic Case against the Euro. New Europe Research Trust Retrieved on July 3, 2015, from http://www.no-euro.com/factsfigures/pdf/ec.pdf Economics Help. (2011). Should the UK Join The Euro? . Retrieved Jun 25, 2015, from http://www.economicshelp.org/blog/771/euro/should-uk-join-the-euro/ European Commission. (2015). The euro. Retrieved Jun 25, 2015, from http://ec.europa.eu/economy_finance/euro/index_en.htm European Commission. (2002). The macroeconomic effects of the Single Market Programme after 10 years. Retrieved on July 3, 2015, from http://ec.europa.eu/internal_market/top_layer/historical_overview/background_en.htm European Commission. (2007). Steps towards a deeper economic integration: the Internal market in the 21st Century. Retrieved on July 3, 2015, from http://ec.europa.eu/economy_finance/publications/publication784_en.pdf. Minford, P (2002). Should Britain Join the Euro? The Chancellor’s Five Tests Examined. Retrieved Jun 25, 2015, from /default/files/publications/files/upldbook147pdf.pdfhttp://www.iea.org.uk/sites Nieboer, J. (1998). A Speech to the Political Action Group for Europe. Bruges Group Papers. Retrieved Jun 25, 2015, from https://books.google.com.sa/books Appendices Appendix 1: Research questionnaire Kindly answer all the questions below accurately by ticking as appropriate. All the information will be treated in confidential. 1) Gender: Male [ ] Female [ ] 2) Age limit: 18-24 [ ] 25-34 [ ] 35-49 [ ] 50-54 [ ] 55 and above [ ] 3) Education Level O-level/A-level Certificate [] College Certificate [ ] College Diploma [ ] Bachelor Degree Master’s Degree [ ] Phd [ ] 4) Do you think the government should hold a referendum on the UK joining euro Government should commit [ ] Government should not commit [ ] I do not know [ ] 5) How would you vote in a referendum on the UK’s membership of the Euro? Vote to join [ ] Vote not to join [ ] I do not know [ ] I won’t vote [ ] 6) What is the distributed Impact on UK Political Status of Joining the euro? Very negative [ ] Negative [ ] Neutral [ ] Positive [ ] Very Positive [ ] 7) What is the distributed Impact on UK economy of joining the euro? Very negative [ ] Negative [ ] Neutral [ ] Positive [ ] Very Positive [ ] 7) What is the distributed Impact on UK business of joining the euro? Very negative [ ] Negative [ ] Neutral [ ] Positive [ ] Very Positive [ ] 8) What is the distributed Impact on UK people of joining the euro? Very negative [ ] Negative [ ] Neutral [ ] Positive [ ] Very Positive [ ] Read More