Membership of the Euro would involve replacing £ with Euros and adopting a common EU monetary policy. Some argue the disadvantages of the Euro significantly outweigh advantages and therefore we should never join. The UK govt state they have no fundamental objection to joining but will only join when its 5 economic tests are met.Govts Five Tests1. Is there sustainable convergence between the UK and the EURO zone economies.2. Is there sufficient flexibility to cope with problems as a member of EMU?3. What effect would membership of the EURO have on investment4. What effect would membership have on the UK financial service industry5. What is the overall impact on growth, stability and jobsThe first test is whether there is sustainable convergence between the UK and the Euro zone. This is important for the successful implementation of a common monetary policy. For example if the UK was in a recession but other countries were growing interest rates will most likely be too high for the UK and therefore cause even lower output. At the moment it is argued that the German economy is in recession because the ECB has kept interest rates too high.At the moment 02 / 2004 the UK… Read full this story
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