Why the UK joining the Euro Zone Could Be a Challenging Experience

d resources among the Euro Zone members It was the 1st of January 1999 when the Euro was officially adopted as the official currency in the participating countries of the European Union (EU), namely France, Germany, Spain, Portugal, the Netherlands, Belgium, Luxembourg, Austria, Italy, Ireland, Finland, and Greece. Citing economic disadvantages, some EU countries refused to join the European Monetary Union (EMU) and have not introduced the euro in their domestic market. The United Kingdom is one of these countries.The United Kingdom’s economy is larger than any of the European Union members. Since 1992, the UK has enjoyed a growth of output and employment, combined with low inflation, superior to most European economies. (Dobson Hook 2003: p. 113) Public opinion in Britain seems to equate economic disadvantage to the country once fully integrated with the weaker European economies by abolishing the pound in favor of the new currency. In fact, a big number of people do not want to give up the Pound for the Euro because the latter is thought to be inferior. (Wargitsch 2007: p. 1) Indeed, why change a successful system?The UK economy differs from the rest of the EU in three main ways, which may mean that it would be affected more significantly than other members by changes in policy, thus the hesitations. These differences are:1. More UK borrowing is undertaken on variable interest rate terms than in most EU countries. So if the Euro area’s interest rate were to rise, this would affect UK home buyers and firms more than those in other EU countries.3. The UK is also still a major exporter of oil, so its economy is influenced more (and in a different way) by changes in the world price of oil than other EU countries that import oil. (Grant, Vidler, Ellams 2003: p. 202)Back in 1997, Tony Blair and Gordon Brown set five economic conditions for joining the Euro: 1) the UK economy needed to converge with the Euro Zone economy so that Britain could cope with Euro Zone interest rates. business and workforce had to demonstrate the ability to adjust to change. a decision needed to be made on whether joining the EMU would encourage investment in UK business. joining must not adversely affect the UK financial services industry. and the fundamental test, that would be promoted long-term., stability and employment would be promoted long-term.