Adopting the Single Currency with Respect to the British Economy
It was back in the year 1970 the first vision of some kind of a united Europe and a monetary union surface, and in 1979 when the first European Monetary System came into existence, the vision became a reality. The primary drive was to eliminate the fluctuation of the various currencies so that all member nations would use a single currency. At the same time, there was a plan to come up with a central bank that will monitor inflation, set interest rate and take charge of monetary policies on behalf of the member nations, without the influence of the various governments.
There was also a plan to come up with a European Parliament and on the outset six countries, including Britain decided to adopt the report. It does not mean the plan was problem-free as it started encountering hindrances starting from the year 1971 that had necessitated coming up with various solutions. The final aim was the introduction of the single currency would start in 1997 and it would be possible to extend the final date up to 1999 if some of the members encountered problems of meeting the requirements set by the EC.
In all this, Britain had difficulty of adopting the single currency even if she joined the union in 1990, but did not stay long and left in 1992. Eventually, when the deadline of the 1997 approached she obtained an opt-out option, where unless the Parliament and the government decide on a course of action, the nation cannot move into the final stage of joining the EU as a member.
This paper will discuss how such measure would affect the economical well being of Britain and if the nation has to join the EU, what will be the best way of doing it. Is it possible to do it by referendum? Alternatively, as many sources and citizens are saying, Britain does not have to join the EU since it will create a considerable disadvantage to the nation. This paper will address all the different opinions and outlooks. Introduction
The primary initiative to integrate Europe and the plan to introduce a single currency came into existence after the creation of the European Monetary System (EMS) in 1979 that came up with the idea of coming up with a quasi-fixed exchange rate the various governors of Central Banks would monitor. What constituted EMS on the outset were the European Currency Unit (ECU) and an Exchange Rate Mechanism (ERM). At the beginning the ECU started out, as an accounting tool to work with the members budget and eventually it seemed that it had gained a status of a 13th currency made up of the other EU currencies.
What the ERMA introduced that became unsustainable was a currency parity of the euro member parities that introduced a band of +/- 2. 5 per cent for Spain and +/- 6 per cent for Britain. Two speculations occurred that made it impossible for a number of currencies to remain within this limit. In September of 1992, in what got the label of the Black Wednesday, the British pound and the Italian lire had to abandon the system because of speculations directed at them.
In July 1993 another speculation targeted the French franc, but intervention by the Bank of France and Bundesbank enabled it to continue holding its position, however, that manoeuvre ended up raising the range of the band to +/- 15 per cent fluctuation. What materialized in 1979 was the culmination of efforts that started as far back as 1970 when Pierre Werner, the Prime Minister of Luxembourg came up with the idea of a complete monetary union among the European nations by around 1980.
The aim was that the particular proposal would incorporate easy convertibility mechanisms to currencies, to eliminate currency fluctuation among the EU currencies, to introduce some kind of parity into rates and to liberate capital movement among the members. The report further had emphasized that there will be some kind of economic control introduced at the community level, where national budgets for those who would participate would be decided by what is to become as an European Parliament. Six countries that include Britain had adopted the report.