IndexIntroductionHistory of the EurozoneRecent developmentsEffects of the EurozoneWhy did the United Kingdom not join the Eurozone?Reasons for joining the EurozoneConclusionIntroductionThe Euro shines as a symbol of European integration after countless years of planning and strategy to unify Europe. Extremely successful, the euro is an international competitor among the world's monetary powers. However, not all member states have made the leap to join the Eurozone. One such example is the United Kingdom. Although still a major decision maker in the European Union, Britain has continued to maintain its own currency despite having numerous deep trade and economic ties with the European Union. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay To understand why, you need to analyze the history of the euro, the eurozone and the United Kingdom. Some scholars such as Peter Howard and John Grahl argue that if Britain were to join the eurozone, both the EU and Britain would benefit from further economic involvement. However, other scholars such as Patrick Minford argue that Britain should maintain its own independent currency. For the purposes of this article, I will support the first hypothesis; I believe the UK should join the euro and, in doing so, strengthen both the EU and UK economies. History of the Eurozone To understand the Eurozone, you need to understand the history behind it. Since the founding of the European Union, the common economy has been at the center of attention. The European Union was originally founded as a means to create a single “common market,” or a central place where similar trade and economic policies could thrive (Mamadouh & Van Der Wusten, 2011, p.111). Politics was at the forefront of this goal. Having a single, cohesive currency would allow for more fluid trade, imports and exports of goods from European member states. (Mamadouh & Van Der Wusten, 2011, p.111). Furthermore, a single currency would help enormously to strengthen the monetary fluctuations that were ravaging Europe during the post-war economy. Having a single currency would allow the stabilization of the economic context throughout Europe. (Mamadouh & Van Der Wusten, 2011, p.111). The idea of ​​a Europe-wide economic and monetary union preceded the creation of the European Communities. The first real attempt to create such a union came from an initiative of the European Commission in 1969 (Bache, Bulmer, George, & Parker, 2015 p. 385). The idea of ​​“greater coordination of economic policies and monetary cooperation” (Bache, Bulmer, George and Parker, 2015 p. 385) officially proposes the concept of a unified Europe. During this time period, exchange rates between member states and other international actors fluctuated massively due to an unstable European currency (Bache, Bulmer, George, & Parker, 2015 p. 386). To combat this, the European Council commissioned Pierre Werner, Prime Minister of Luxembourg at the time, to come up with a plan to reduce or stop the massive currency fluctuations currently plaguing Europe (Mamadouh & Van Der Wusten, 2011, p.112 ). Its 1970 report recommended “the development of a common concept of the state of economic and monetary union” (Werner, 1970, p. 116). Although Werner did not actually advocate a single currency, his ideas further led to the consideration of monetary integration. within Europe. The 1988 Hanover European Council started preparations for an all-encompassing monetary union in Europe (Mamadouh & Van Der Wusten, 2011, p.112). At this point in history, the majority of European statessupported the idea of ​​a European monetary union, with a single central bank (Mamadouh & Van Der Wusten, 2011, p.113). However, the then British Prime Minister, Margaret Thatcher, opposed this idea. She argued that joining the euro would cause the value of the pound to fall (Mamadouh & Van Der Wusten, 2011, p.115). As a common European economic policy moved forward with or without Britain's approval, Commission President Jacques Delors was asked to form a committee to provide a detailed and outlined plan for the creation of a single European economic and monetary union. (Bache, Bulmer, George, & Parker, 2015 p.387) However, the question of what to do with Germany continued to plague the planning process. France and Britain continued to distrust German military power after World War II (Mamadouh & Van Der Wusten, 2011, p.115). Since this economic policy would have required German reunification, France and Britain vehemently opposed this plan (Bache, Bulmer, George, & Parker, 2015, p. 387). However, Germany's commitment to eliminate the mark and accept a European currency influenced France. support German reunification (Mamadouh & Van Der Wusten, 2011, p. 113). President Delors' 1989 plan formalized attempts at further economic integration across emerging Europe (Bache, Bulmer, George, & Parker, 2015 p. 387). The Delors report introduced the concept of “Economic and Monetary Union”, i.e. a single unified plan to unite all the various economies of Europe into a single union (Bache, Bulmer, George and Parker, 2015 p. 387-389) . . According to this plan, the Maastricht Treaty was signed on 7 February 1992 which marked the congruent agreement to form a single currency throughout Europe (Bache, Bulmer, George and Parker, 2015 p. 387-389). The next major step in the creation of the euro was the creation of the European Monetary Institute (Mamadouh & Van Der Wusten, 2011, p. 112). Once agreements on the currency specifications were reached, January 1, 1999 was chosen as the day for the implementation of the new currency (Mamadouh & Van Der Wusten, 2011, p. 112). Before the launch, the European Commission adopted the Stability and Growth Pact, a plan to ensure the stability of the future singular currency (Mamadouh & Van Der Wusten, 2011, p. 112). Furthermore, this pact created the Second Exchange Rate Mechanism (ERM II) in order to aid the overall stabilization of the European currency (Bache, Bulmer, George, & Parker, 2015 p. 390). On May 3, 1998, the European Council met in Brussels to decide which of the current European states will be selected as candidates for the new European currency (Mamadouh & Van Der Wusten, 2011, p. 113). Member states wishing to join the euro required strict rules. Specifically, “a maximum public debt equal to 60% of GDP and a maximum budget deficit equal to 3% (the convergence criteria regulating access to the euro contained the same thresholds)” (Mamadouh & Van Der Wusten, 2011, p. 114) were the requirements. Among the original member states, Belgium, Denmark, France, Germany, Ireland, Luxembourg, and the Netherlands joined the euro (Bache, Bulmer, George, & Parker, 2015 p. 390). Three member states met the requirements but refused membership for various reasons. Specifically, “Britain and Denmark were allowed to do so under the terms of their 'opt-out'. Sweden was able to claim, for technical reasons, that it had not met the conditions because it had not been a member of the ERM for two years before the launch of the euro.” (Bache, Bulmer, George, & Parker, 2015 p. 390). To facilitate a smooth transition between national currencies and the euro, the European Central Bank was created to take power from the European Monetary Institute (Mamadouh &Van Der Wusten, 2011, p. The European Council established the exchange rate between national currencies and the Euro based on the recommendations of the European Commission (Mamadouh & Van Der Wusten, 2011, p. 111). The Euro originally took the form of an exclusively electronic currency, since no physical currency existed. the means to produce the euro existed at the time of creation (Mamadouh & Van Der Wusten, 2011, p. 111). ON January 1, 1999, the euro was launched as the official currency of the European Union in France, Germany, Ireland, Italy, Luxembourg, and the Netherlands (Bache, Bulmer, George, & Parker, 2015 p. 390). Denmark and the United Kingdom held referendums and voted not to join the euro (Bache, Bulmer, George, & Parker, 2015 p. 390). Following the creation of the Euro, the final number of member states grew to nineteen, the current number we know today (Bache, Bulmer, George, & Parker, 2015 p. 391). Recent DevelopmentsHowever, the creation of the Euro did not come without its fair share of trial and error. The Eurozone crisis occurred when the subprime mortgage market in the United States collapsed, causing a global market crash (Weber, 2015 p. 248). At one time or another, almost all European states failed to meet Maastricht's 3% debt requirements (Weber, 2015 p. 252). When the “debt-to-GDP ratio skyrocketed” across Europe, the financial crisis was unleashed (Weber, 2015 p. 251). As unemployment rates rose to nearly 27% in Greece and Spain, people began to question the validity of joining the eurozone. (Weber, 2015 p. 251) As a result, the GDP of eurozone countries slowed to a screeching halt. In the third quarter of 2008, the Eurozone was officially in recession (Weber, 2015 p. 257). In an attempt to combat the Eurozone crisis, the 2009 Treaty of Lisbon officially created the Eurogroup (Mamadouh & Van Der Wusten, 2011, p.116). The Eurogroup consisted of the finance ministers of the various members of the European Union and an elected president (Mamadouh & Van Der Wusten, 2011, p. 116). This group advocated for greater economic cooperation and economic involvement in order to ensure the strength of the EU and the euro (Bache, Bulmer, George, & Parker, 2015 p. 390-391). Eventually, a plan was developed to mitigate the financial crisis by pumping billions of euros into the European Union banking system (Bache, Bulmer, George, & Parker, 2015 p.387). In essence, the plan was to fund European banks with enough money to encourage more lending. This plan was similar to the plan used by the United States at the time. As time passed, the plan worked and the euro continued to strengthen (Weber, 2015 p. 259). Ironically, the European Union has done better during this crisis than the states that criticized it at the time. As fears of a possible collapse of Europe's weakest state continued to plague the European Union, eurozone leaders finally decided to insert a clause into the Euro. rescue agreement. (Weber, 2015, p. 275). Known as the “European Financial Stability Facility,” this new program provided a temporary means of providing financial assistance to member states such as Ireland, Portugal and Greece that were having difficulty repaying euro debts. However, in 2010, the European Financial Stability Facility was replaced with the European Stability Mechanism, a more permanent mechanism to provide assistance to failing member states. “The European Stability Mechanism is the permanent crisis resolution mechanism for the euro area countries. The ESM issues debt instruments to finance loans and other forms of financial assistance to euro area Member Statesof the euro. The decision leading to the creation of the ESM was taken by the European Council in December 2010. On 2 February 2012, the euro area member states signed an intergovernmental treaty establishing the ESM. The ESM was inaugurated on 8 October 2012 (Why the Euro, 2015).Effects of the Eurozone To understand exactly how the Eurozone has influenced the economies of the member states, a closer look at the economies of the member states is needed Eurozone. An article by Tal Sedah studied the effects of joining the Euro on economic trade both within and outside Europe. The study found that states within the Eurozone overall carried out twice as much trade as similar states that were not within the Eurozone (Sadeh, 2014 p. 214). Argues that since the beginning of the birth of the eurozone, trade was not changed much due to the lack of widespread circulation of euro banknotes as the previous currencies were still collected (Sadeh, 2014 p. 227). Tal argues that states within the eurozone have carried out more trade within other eurozone states and international states. He argues that “the euro primarily improves variety-oriented trade by reducing the fixed costs of cross-border trade, rather than by lowering transaction costs. Because consumers and small businesses handle cash relatively more than large corporations, for many of them the euro was not a reality before they began preparing for the introduction of its notes and coins in 2002.” (Sadeh, 2014 p. 232-233). Furthermore, Tal found that even during the 2008 global financial crisis, states within the eurozone performed better than non-eurozone European states. He argues that the widespread use of the euro has helped strengthen the currency's overall value, allowing for greater buoyancy during economic downturns (Sadeh, 2014 p. 232). Another more specific study was conducted by Cavallo et al in order to investigate the specific benefits of joining a common monetary union such as the euro. Researchers used Latvia as a specific case study to examine how joining the euro altered price impacts on international markets (Cavallo, Albernto, Neiman, & Rigobon, 2015 p. 282). Essentially, researchers study the differences in goods sold in Latvia and other European states before and after Latvia's accession to the Euro. Specifically, the researchers used products sold by Zara, a large manufacturing company that sells goods internationally. The researchers found that “in the first week of 2014, when Latvia officially entered the eurozone, 90% of its prices (at the local currency level) changed.” (Cavallo, Albernto, Neiman and Rigobon, 2015 p. 289). In essence, when Latvia based its prices on the Euro instead of the Lats, prices suddenly and massively changed further towards the average price of goods across Europe. This came as a big surprise to the researchers, as the price differences between goods before joining the eurozone were huge. Price differences between an item in Latvia and an item in Germany could reach 100%. However, almost immediately after joining the Euro, the price difference stabilized at zero (Cavallo, Albernto, Neiman, & Rigobon, 2015 p. 291). For Latvia, this price stabilization meant that Zara could compete much more competitively in Latvia after the acceptance of the Euro. Instead of suffering a massive reduction in product prices due to the currency exchange, Latvia could maintain pricescompetitive for the goods sold. However, this phenomenon has extended beyond just Zadar. An earlier study by Cavallo, Neiman, and Rigobon (2014) found that prices stabilized almost immediately across eurozone states forever and I even sold my H&M. (Cavallo, Neiman, & Rigobon, 2014, p. 529-530) Additionally, researchers “demonstrated lower price dispersion within the eurozone for more limited data on products sold by Adidas, Dell, Mango, and Nike” ( Cavallo, Neiman and Rigobon, 2014, p. 534-535) The authors concluded that Latvia's membership in the eurozone contributed massively to the stabilization of prices of the Zara good throughout the European economic sector. Specifically, “While 6% of goods sold in Latvia and Germany in November 2013 had the same price, around 85% had the same price at the end of January 2014 and around 90% by the end of February 2014” (Cavallo, Albernto , Neiman, and Rigobon, 2015 p. 293-294). Why didn't the UK join the Eurozone? Given these economic benefits of joining the Euro, why does the UK continue to postpone joining the Eurozone? Patrick Minford, an economic analyst, argues that it is necessary to analyze three specific economic concerns to understand why Britain continues to refuse to join the European Economic and Monetary Union (Minford,2004 pp. 82-84). Firstly, Minford argues that Britain's membership of the EMU would create enormous variability within the UK economy when it comes to dealing with shocks such as the collapse of the housing market (Minford, 2004 p. 82) . He argues that joining a single currency would undermine Britain's ability to have a flexible exchange rate when trading with other countries (Minford, 2004 p. 82). Because Britain trades more heavily with international partners than other European states, Minford argues that the British economy relies more on the flexible exchange rate to absorb shocks and fluctuations (Minford, 2004 p. 82). The second main argument put forward by Minford is idea of ​​harmonization. Minford argues that as Britain remains independent of the Eurozone, it maintains a greater ability to remain flexible and independent in setting wages, maintaining taxes and other economic institutions (Minford, 2004 p. 83). In essence, Minford argues that Britain maintains an advantage over the eurozone in its ability to independently set wages, taxes and establish or revoke various economic institutions. Given that eurozone states must act collectively, Minford argues that Britain retains an advantage in being able to act alone (Minford, 2004 p. 83). Specifically, Minford cites his earlier 1998 study to illustrate the potential for large financial needs to meet the economic policies of other European states. Finally, Minford argues that the “emerging state pension crisis” of Germany, France and Italy threatens the stability of the eurozone. , even before the accession of Great Britain (Minford, 2004 p. 82). Specifically, he cited the 1995 OECD paper by Leibfritz, Fore, Wurzel, and Roseveare that projects various pension payments to reach 10, 8, and 11 percent of states' GDP, respectively (Leibfritz, Fore, Wurzel, and Roseveare, 1995). Minford argues that as pension payments continue to eat up more and more of countries' GDP, the ability to correct the situation will diminish. Specifically, he cites the growing unemployment and slowing growth plaguing Germany, France and Italy (Minford, 2004 p. 84). In essence, Minford argues that if Britain were to join the EMU, it would be held partially responsible, in a community sense, for having contributed to.