United Kingdom and the euro
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The United Kingdom does not use the euro. The UK has negotiated an opt-out from the portion of Maastricht requiring adoption of the euro in place of the pound sterling, and the current Prime Minister, Gordon Brown, has ruled out membership for the foreseeable future, saying that the decision not to join had been right for Britain and for Europe.[1] The British government under Brown has committed itself to a triple-approval procedure before joining the Eurozone, involving approval by the Cabinet, Parliament, and the electorate in a referendum. Public opinion is consistently against joining. A 2005 opinion poll showed that 57 percent of the British public were against joining the Eurozone.[2]
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[edit] Economics
Unlike other European countries, where the euro is seen mostly as an essential building block in a more politically integrated Europe, in the United Kingdom the possible benefits of Eurozone membership are seen as principally economic, and an assessment of British membership based on five economic tests was published on 9 June 2003 by Gordon Brown, who at the time was Chancellor of the Exchequer. Though maintaining the government's positive view on the euro, the report came out against membership because four out of the five tests were not passed. Moreover, the 2003 document also reflected on the considerable progress of the UK towards satisfying the five tests since 1997, and the desirability, at least in the eyes of the government of the time, of policy decisions orientated towards adapting the UK economy to better satisfy the tests in future, citing considerable protracted benefits to be gained from eventual, prudently conducted EMU membership.
Some of the nation's eurosceptics believe the single currency is merely a stepping stone to the formation of a unified European superstate, and some believe that removing the UK's ability to set its own interest rates will have detrimental effects on its economy. Others in the UK, usually joined by eurosceptics, advance several economic arguments against membership: the most frequently cited argument concerns the large unfunded pension liabilities of many continental European governments—unlike in the UK—which could, with an ageing population, depress the currency in the future against the UK's interests.[citation needed]
An opposing view is that intra-European exports make up to 50% of the UK's total, and a single currency would enhance the single market by removing currency risk. However, financial derivatives are becoming more accessible to small UK businesses, allowing businesses to offset currency risk (albeit at a cost that eurozone competitors do not bear). An interesting parallel can be seen in the 19th century discussions concerning the possibility of the United Kingdom joining the Latin Monetary Union.[3]
Gordon Brown stated in June 2003 that the best exchange rate for the UK to join the single currency would be around 73 pence per euro[4] (a value which the pair did not reach until 28 December 2007[5]). This rate has not been formalised as an official condition of entry.
Between December 2007 and February 2008, the Euro steadily gained against the pound reaching eighty pence to the euro, and stabilising at around seventy-nine. It remains to be seen what will happen in the long run when the global credit crisis is resolved, and whether the equilibrium reached at that time will be closer to the seventy-three pence ideal put forward in the document of 2003.
[edit] Sterling zone
If the United Kingdom were to join the eurozone, this might affect those jurisdictions that also use the pound sterling, or which have a currency on a par with sterling, the Sterling Area. The Crown dependencies use variants of the pound sterling, the Isle of Man pound, Jersey pound, Guernsey pound, and Alderney pound. They all share the same ISO 4217 code GBP. Some other British Overseas Territories have their currencies fixed at par with sterling: the exchange rate is fixed so that £1 in the local currency equals £1 in sterling. They are Gibraltar, the Falkland Islands, the British Indian Ocean Territory and Saint Helena.
The French overseas departments and territories were faced with a similar situation when France joined the eurozone. Those which used the French franc themselves switched to using euro. Some overseas territories used the CFP franc. While these had fixed exchange rates with the French franc, they were not at par - in fact for various historical reasons they were worth considerably less, at approximately 5 centimes. Both the CFA and CFP franc remain in existence, but are now linked to the euro at fixed rates instead. These fixed rates and free convertibility of these currencies are maintained at the expense of the French Treasury. A similar situation exists with the Comorian franc, which is also now fixed against the euro.
The sterling zone territories therefore have four options:
- Enter the eurozone as a non-EU member, either as a distinct national variant of the euro — just as Monaco and the Vatican have done. The EU has demanded that 'monetary agreements' be entered into by non-EU members who wish to issue their own euro coinage, and has pressured Andorra into not issuing their own coins until this is resolved. Such agreements, the EU has stated, must include adherence to EU banking and finance regulation.
- Use standard euro coins issued by the UK or other eurozone countries. This may be perceived by some as losing an important symbol of independence.
- Maintain their existing currency, but peg at a fixed rate with the euro. Maintaining a fixed rate against the attentions of currency speculators can be extremely expensive, as the UK found on Black Wednesday. However, if the UK supports the keeping of the fixed rates of these small currencies, it would be so trustworthy that no speculation would take place.
- Adopt a free-floating currency, or a currency fixed to another currency, as the Jersey government has hinted.[6]
Gibraltar is in a separate position, as it is within the EU (as part of the UK's membership). If the UK were to adopt the euro it might not be possible to implement an opt-out for Gibraltar. It is unclear whether Gibraltar would be subject to its own referendum or would be included in a UK referendum, since Gibraltar votes as a part of the UK in European parliamentary elections.
[edit] Banknotes
Currently, some private banks in Scotland and Northern Ireland are able to print and issue sterling banknotes of their own design. This is seen by many in these areas as an important part of their national identities.
In November 1999, in preparation for the introduction of the euro notes and coins across the eurozone, the European Central Bank announced a total ban on the issuing of banknotes by entities that were not National Central Banks ('Legal Protection of Banknotes in the European Union Member States'). Unless a derogation could be negotiated by the UK as a condition of entering the eurozone, a change from Sterling to the euro would mean an immediate end to the circulation of Scottish and Northern Irish banknotes (see sterling banknotes). The ECB has also stated that even with notes issued by a central bank, there is 'no room for exclusively national arrangements'—all notes must be produced according to the central designs.
National variation is allowed in the design of euro coins, and it is possible that the Royal Mint could continue to include the symbols of the Home Nations on the British-designed coinage, although this would have to be included in place of the monarch's portrait. The position of the Crown Dependencies is less clear. The European Union has so far strongly resisted attempts to issue euro-equivalent notes by non-EU states unless steps are taken to enter into a suitable monetary agreement, including the adoption of EU banking and finance regulations (see Andorran euro coins).
[edit] New Sterling Coin Design
Great Britain will go forward with its new coin designs in 2008 following the Royal Mint's biggest redesign of the national currency since decimalisation. Experts says that this decision is to reinforce that the euro will not be adopted in the UK for a long while [7].
[edit] References
- ^ "Puritanism comes too naturally for 'Huck' Brown", The Times, 2007-07-24. Retrieved on 2007-08-13.
- ^ Joining The Euro. Ipsos MORI (2006). Archived from the original on 2007-02-16. Retrieved on 2006-09-12.
- ^ Einaudi, Luca (2001). European Monetary Unification and the International Gold Standard (1865-1873) (PDF), Oxford University Press. ISBN 0-19-924366-2. Retrieved on 2007-08-13.
- ^ Britain not ready to join euro. Guardian Unlimited (2003-06-09). Retrieved on 2006-09-12.
- ^ Pound sterling (GBP). European Central Bank. Retrieved on 2008-01-05.
- ^ What should the Island do in the wake of Jersey’s curve ball?, PDMS, 2003-09-01, accessed on 2007-01-07
- ^ Make Way for Britain's New Coin Designs. Retrieved on 2008-05-17.
[edit] External Links
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