Single european currency

Title: Single European Currency

Name: Nuria Vilcarromero

Date:

Question
In light of the recent economic and monetary crisis in the Euro zone, do you think the UK government should join the EURO?  What would be the advantages and disadvantages? 
Discuss and evaluate.  Ensure you cover exchange rate theory and practice in the post War period
 
Introduction
The question of whether theUK should join the euro has proved to be one of the most difficult issues in the history of British politics. Both the Labour and Conservative parties have been divided by the issue and it has been the source of seemingly endless debate in recent years in the House of Commons. At its heart lie issues, whose complexities and subtleties have been tossed back and forth since the founding of theCommon Market; in many respects, the question of whether the UK should join the euro is part of a debate, which has been a big part of political life in the UK in one form or another for decades, that is, how close should the relationship between the UK and Europe be? In a sense, any debate about the pros and cons of monetary union should consider these wider issues, but at present the viewpointsgenerally put forward both for and against the proposal show a remarkable level of detail and some insight into the wider effects which a change of policy might have on the UK economy.

The Post-War Period
The post-war period for the UK was characterised by economic stagnation and decline and its rate of growth did not come anywhere near to matching that of the other industrialised nations. Whilethe country was still quite rich, its economic decline saw a drop in living standards as a result as other nations entered growth phases which the UK could not match. The reasons given for this decline are many, although there is no broad agreement as to its causes. Nevertheless, it is often claimed that the failure to deregulate the UK economy after the war and expose producers and businesses toexternal competitive pressures was wrong. Additionally, the lack of a modernisation programme after the war and state intervention meant that while countries such as Germany and Japan did well economically, the UK did not. These factors were the backdrop to the changes which took place elsewhere in Europe and with the creation of the Common Market and the drive for greater integration, there werepolitical tensions in the UK where monetary policy had become heavily politicised, and the outlook resulting from the UK’s imperial past made decision making difficult. Integration did not match the national mood at the time and a lack of decisiveness in relation to the EU generally has formed the backdrop to opposition to the euro. Later on, the Thatcher era brought this opposition to Europe to ahead and the arguments tended to be very strongly expressed. Since then successive governments have been indecisive and policy has fallen victim to various pressure groups both within and without the political parties. 
Disadvantages of joining the Euro
The principal arguments put forward against joining the euro are generally believed to be the following:  

1. The Loss of Independent MonetaryPolicy
The UK currently has control over its interest rate policy and interest rates are set by the Monetary Policy Committee in line with what is thought to be best for the UK economy; should the UK join the euro, the European Central Bank would assume control of interest rate policy and set a rate, which it felt were best for the euro zone as a whole, rather than any one individualeconomy. Accordingly, if there were a recession, the UK would be unable to cut rates in order to provide cheaper loans, boost demand and enable the country to fight its way out of recession. The recent downturn in economic conditions, it is argued has shown how important it is to retain such control.
One of the main difficulties is that the economies of the different countries of the EU are at different...