UK and the Euroscepticism: good or bad decision?
United Kingdom joined European Union in 1973. Since this date, UK has shown difficulties to fully trust the UE. However, Great Britain stays one of the main actors of European Union, it is third most powerful economy in EU and the fifth in the world. It belongs to OCDE, G8and also common wealth. We can say that UK is an important part of EU but it always doesn't fully agree with European union ways and especially with the single currency.
We’re going to study the Great Britain Pound. First of all, we will highlight the reasons of English refusal concerning Euro adoption. They had the right to not accept this currency but the most important question is why did theyrefuse?
Then, we will try to find if they did wright by not joining the third phase of European Union which is being part of common currency. Comparing pound with Euro and Dollar will give us some answers.
1. Historic and arguments in favor of the British euroscepticism
England has obtained a specific clause called « op-out » which lets UK the choice to adopt or not the third phase ofmonetary European Union (MEU). And UK used this option and decided to not accept this currency. England is still in the second phase of MEU and this clause was one condition to make UK agreed to the entire treaty.
Protocol says that some treaty clauses can be avoided by UK:
• Power of UK in monetary policy field stays the same, which means (UK keeps power on this fields according tonational right)
• UK is not submitted to treaty constraint concerning huge deficits
• UK is not concerned by treaty about central banks European system, European central Bank and those institutions’s decisions.
England didn’t accept Euro as its currency because of many reasons. We would like to understand those reasons in order to study further the economical aspect of this refusal.Everyone in Europe agreed with the currency Euro especially by exchange markets.
The first main issue was about economical situation differences. At the beginning Tony Blair was for Euro but he listened to his financial minister Gordon Brown and reported the decision. M. Brown didn’t want to adopt Euro immediately and just let think that if England accept Euro that will be later on during referendum.According to the England financial minister, UK couldn’t accept Euro at the moment for 5 economical criteria:
• The first one but not the least, it’s even the most important reason of England refusal. It is about the convergence of the cycles and economic situations. According to M. Brown, it is impossible to have fix changes and also a single currency if economic situations are toodifferent except if rectifications are done with, for example, employment. As we said, economic situations were and are too different, except for inflation: 2% in Euro area, 2,5% in England. About growth, differences are strong. We also find differences on unemployment rate. According to English study their unemployment rate is hardly of 3,1% (5,1 according to OCDE) against 8,8% in Euro area. That’sa motivated reason of England to not accept to belong to single currency.
• The second criterion is about flexibility. According to English, economies have to be quite flexible in order to face unplanned invents and activity stagnations. If we compare, flexibility is much higher in England than European continent. According to English job market, we can highlight that there is no minimumsalary so flexible salaries and workers mobility (firing is easier than ours therefore hiring is faster). English think that to belong to a same currency area adjustments have to be done the fastest and the best possible, we have to be the highest flexible.
• The third reason is about investment. UK wants single currency to give the opportunity to grow public or private investment, no...