Why Britain Should Not Join the Eurozone - Essay Example

The rest of the seven countries will join the Eurozone after fulfilling the requirements. Eurozone came into being on January 1, 1999, with eleven members, which met the criteria. Exactly after two years Greece also joined the Eurozone and today the country is facing huge financial and economic troubles (Sladek, pp. 12, 2010). This would be discussed later in the paper. However, the major objective of the paper is to discuss why Britain should not join the Eurozone especially considering the recent economic disaster in Greece.

Discussion
Ever since this debate started, public opinion in the United Kingdom has been against the adoption of the Euro. In the polls of 2005, 57 percent of the people opposed, in 2008, the percentage increased to 59 and in the year 2009, the percentage of people against the euro increased to 68 percent (Lynn, pp. 249-256, 2010). More importantly, the current economic recession and decrease in the value of the pound did not change the opinion of the public and considering the recent chaos in Greece and in 2010, 75 percent of the people expressed their desire that Britain should stay away from Euro. The current coalition government between Liberal Democrats and Conservatives also decided that under the current government no further progress would be made to join Eurozone (Lorca-susino, pp. 6-8, 2011).

Despite the fact that more than 60 percent of the UK’s exports are to European countries, the stability of the UK’s economy greatly depends upon its ability to set its own interest rates or alter the valuation of its currency. For example, in order to ensure that the UK could minimize the shocks of the recession, it lowered its interest rates to a record low level of 0.5 percent so that investments could be encouraged in the country (Pelagidis & Mitsopoulos, pp. 377, 2011). Furthermore, the devaluation of the pound in the international arena in the recent past is exactly what the country needed to boost its economy since it helped the economy to boost its exports. If the UK joins the Eurozone then it will lose all hope to make any gains on the possible depreciation of the Euro since more than 60 percent of the UK’s trade would be taking place with Eurozone countries (Farkas & Murphy, pp. 58-59, 2011).

Furthermore, the housing market of the UK is such that it responds very quickly to the interest rates since they have high variable mortgages. Therefore, small fluctuations in the interest rate may mean huge effects on consumer spending and disposable incomes (Alesina & Giavazzi, pp. 85-89, 2010).

Through IMF, the UK will contribute almost 1 billion pounds to the bailout package of Greece. This figure would have been more than double if Prime Minister David Cameron had not interfered in the process. More importantly, this figure would have been even greater if Britain would have been a member of the Eurozone. Furthermore, in the wake of the recent events where billions of dollars have been provided to the corrupt and irresponsible Greece government for a bailout, there remains no room for second thoughts on the idea that the UK should never join the Eurozone.

The current crisis in Greece, which is quickly pushing their government to default and the subsequent bailout packages for Portugal, Ireland, and Italy means that the Euro would lose its value in the international markets and it, is highly likely that investors may also lose their faith in the currency (Pelagidis & Mitsopoulos, pp. 377, 2011). For the past few years, Euro has remained strong due to the well-performing German economy but in the wake of the recent events, it appears the German growth is not going to be enough in order to balance these mounting debts and bailouts (Farkas & Murphy, pp. 58-59, 2011).

The German public and government are not happy to help the Greek government since the economic gurus and pundits have a strong belief that either the Greek government would default anyway or it will take decades before the economy fully recovers (Baldwin, Gros & Laeven, pp. 54-57, 2010). The Greek government is filled from head to toe in debts, the public is against the austerity measures, unemployment is high and corruption is high (that means a considerable portion of the bailout money would wind up in the lockers of influential people and would circulate in the economy) (Lorca-susino, pp. 6-8, 2011). There are speculations that this might be the end of the Euro era and countries may go back to their own local currencies so that they could have more power and influence over their domestic policies and monetary conditions (Alesina & Giavazzi, pp. 85-89, 2010).
Conclusion

Therefore, towards the end, it is understandable enough to conclude that the current financial and debt crisis in Greece and other Eurozone countries is the nail in the coffin of the idea that the UK should join the Eurozone. The future of Greece and other Eurozone countries is extremely uncertain and it would be rational and logical to put aside this debate forever. Read More