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The "United Kingdom has never sought to adopt the "euro as its official currency for the duration of its "membership of the EU, and secured an "opt-out at the euro's creation via the "Maastricht Treaty in 1992. Polls have shown that the majority of "British people have been against adopting the euro and in a "June 2016 referendum the UK voted to withdraw from the European Union, meaning there is virtually no chance of any future adoption. Despite never being a member of the euro, the currency is used in the UK's Cypriot territories and London is home to the majority of the euro's "clearing houses.[1]

Contents

History[edit]

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Gordon Brown set out the 'five economic tests' that must be met before the UK would adopt the euro

The United Kingdom entered the "European Exchange Rate Mechanism, a prerequisite for adopting the euro, in October 1990. The UK spent over £6 billion trying to keep its currency, the "pound sterling, within the narrow limits prescribed by ERM, but was forced to exit the programme within two years after the "pound sterling came under major pressure from currency "speculators. The ensuing crash of 16 September 1992 was subsequently dubbed ""Black Wednesday". During the negotiations of the "Maastricht Treaty of 1992 the UK secured an "opt-out from adopting the euro.[2]

The government of former Prime Minister "Tony Blair declared that ""five economic tests" must be passed before the government could recommend the UK joining the "euro and promised to hold a referendum on membership if those five economic tests were met. "Her Majesty's Treasury first assessed "five economic tests in October 1997, when it was decided that the UK economy was neither sufficiently converged with that of the rest of the EU, nor sufficiently flexible, to justify a recommendation of membership at that time. Another assessment was published on 9 June 2003 by "Gordon Brown, when he was "Chancellor of the Exchequer. Though maintaining the government's positive view on the euro, the report opposed membership because four out of the five tests were not passed. However, the 2003 document also noted the considerable progress of the UK towards satisfying the five tests since 1997, and the desirability of making policy decisions to adapt the UK economy to better satisfy the tests in future. It cited considerable long-term benefits to be gained from eventual, prudently conducted EMU membership.

The UK would also have to meet the "EU's economic "convergence criteria (Maastricht criteria) before being allowed to adopt the euro; which at that time the UK's annual "government deficit to the GDP was above the defined threshold. The government committed itself to a triple-approval procedure before joining the "eurozone, involving approval by the "Cabinet, "Parliament, and the electorate in a "referendum.

"Gordon Brown, Blair's successor, ruled out membership in 2007, saying that the decision not to join had been right for Britain and for Europe.[3] In December 2008, "José Barroso, the "President of the European Commission, told French radio that some British politicians were considering the move because of the effects of the global credit crisis.[4][5] The office of the Prime Minister, "Gordon Brown, denied that there was any change in official policy.[6] In February 2009, Monetary Policy Affairs Commissioner "Joaquín Almunia said "The chance that the British pound sterling will join: high."[7]

The United Kingdom released new coin designs in 2008 following the "Royal Mint's biggest redesign of the national currency since "decimalisation in 1971. German "news magazine "Der Spiegel saw this as an indication that the country has no intention of switching to the euro within the foreseeable future.[8] It is however an unwritten convention that the coin designs should be changed every 40 years to keep the coinage fresh.[9]

In the "UK general election 2010, the "Liberal Democrats increased their share of the vote, but lost seats. One of their aims was to see the UK rejoining "ERM II and eventually joining the euro,[10] but when a coalition was formed between the Liberal Democrats and the "Conservatives, the Liberal Democrats agreed that the UK would not join the euro during this term of government. Following the election of a majority-"Conservatives government in the subsequent election, a referendum on EU membership itself was held, and lost. With the UK's vote to withdraw from the EU, euro adoption is now a practical impossibility. Even if government and or public opinion were to change, the EU's position is that new third countries would only adopt the euro through membership of the EU.[11] Withdrawal may also negatively impact London's position as a hub for euro clearing[1]

Usage[edit]

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The UK's Cypriot bases are the only part of the UK to officially use the euro

Cypriot Territories[edit]

The "Sovereign Base Areas of "Akrotiri and Dhekelia in Cyprus introduced the euro at the same time as Cyprus, on 1 January 2008. Previously, they used the "Cypriot Pound. Since the independence of Cyprus, treaties dictate that British territories in Cyprus will have the same currency as the Republic of Cyprus. These are the only places under British control where the euro is legal tender.["citation needed] They do not issue separate euro coins. Following the "British vote to withdraw from the EU in June 2016, Ioannis Kasoulides, Foreign Minister of Cyprus, announced that Cyprus wished to have EU citizen privileges remain for these areas if the UK ceases to be a member.[12]

Clearing[edit]

London is home to three quarters of all euro "clearing in the world, to a value of 927bn euro. The second largest hub is Paris, which operates 11% of clearing. In light of the UK's withdrawal from the EU, the EU is looking at whether these operations should be forced to move from London, to within the EU so the activities could be regulated by the "European Central Bank.[1]

Exchange rate[edit]

In June 2003, Gordon Brown stated that the best exchange rate for the UK to join the euro would be around 73 pence per euro.[13] On 26 May 2003 the euro had reached 72.1 pence, a value not exceeded until 21 December 2007.[14] During the final months of 2008, the pound declined in value dramatically against the euro. The euro rose above 80 pence and peaked at 97.855p on 29 December 2008.[15] This compares with its value between March and October 2008, when the value of the euro was about 78 pence, and its value of about 70 pence between April 2003 and August 2007. With the impact of the "Global financial crisis of 2008 on the British economy, including failing banks and plunging UK property values,[16] some British analysts stated that adopting the euro was far preferable to any other possible solutions for Britain's economic problems.[17] There was some media discussion about the possibility of adopting the euro. On 29 December 2008, the BBC reported that the euro had reached roughly 97.7p, due to poorer economic forecasts. This report stated that many analysts believed that parity with the euro was only a matter of time.[18]

At that time, some shops in "Northern Ireland accepted the euro at parity, causing a large influx of shoppers from "across the Irish border. This made some shops the most successful in their company for several weeks.[19][20] "Alex Salmond, the then "First Minister of Scotland, called for more Scottish businesses to accept the euro to encourage tourism from the eurozone, noting that this is already done by organisations such as "Historic Scotland.[21]

During 2009, the value of the euro against the pound fluctuated between 96.1p on 2 January and 84.255p on 22 June. In 2010 the value of the euro against the pound fluctuated between 91.140p on 10 March and 81.040p on 29 June. On 31 December 2010 the euro closed at 86.075p.[22][23][24][25][26] A report in Britain's "Daily Telegraph argued that the high euro had caused problems in the eurozone outside Germany.

There was a fairly steady decline in the euro rate during 2013, 2014 and 2015 from 85p to 70p. During 2016 the pound declined against several currencies, meaning the euro rose, especially on 24 June 2016 (because of the EU referendum) when the euro rose from 76p to 82p and further the following days.[27]

Considerations on membership[edit]

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Eurozone participation
"European Union (EU) member states
  19 in the "eurozone.
  7 not in ERM II, but obliged to join the eurozone on meeting convergence criteria ("Bulgaria, "Croatia, "Czech Republic, "Hungary, "Poland, "Romania, and "Sweden).
  1 in ERM II, with an "opt-out ("Denmark).
  1 not in ERM II with an opt-out ("United Kingdom).
Non-EU member states
  4 using the euro with a monetary agreement ("Andorra, "Monaco, "San Marino, and "Vatican City).
  2 using the euro unilaterally ("Kosovo[a] and "Montenegro).

Before the UK's vote to withdraw, the UK's membership of the euro was always a possibility if the UK decided to drop its opt-out. For this time, considerations on the impact of membership were weighed heavily.

Economics[edit]

Some believe that removing the United Kingdom's ability to set its own interest rates would have detrimental effects on its economy. One argument is that currency flexibility is a vital tool and that the sharp devaluation of sterling in 2008 was just what Britain needed to rebalance its economy.[28] Another objection is that many continental European governments have large unfunded pension liabilities. They fear that if Britain adopts the euro, these liabilities could put a debt burden on the British taxpayer,[29] though others have dismissed this argument as spurious.[30] One of the underlying issues that stand in the way of monetary union is the structural difference between the UK housing market and those of many continental European countries.[31]

The entry of the UK into the "eurozone would have likely resulted in increased trade with the other members of the eurozone.[32] It could also have had a stabilising effect on the stock market prices in the UK.[33] A simulation of the entry in 1999 indicated that it would have had an overall positive, though small, effect in the long term on the UK GDP if the entry had been made with the rate of exchange of the pound to the euro at that time. With a lower rate of exchange, the entry would have had more clearly a positive effect on the UK GDP.[34] A 2009 study about the effect of an entry in the coming years claimed that the effect would likely be positive, improving the stability for the UK economy.[35]

An interesting parallel can be seen in the 19th century discussions concerning the possibility of the UK joining the "Latin Monetary Union.[36]

Public opinion[edit]

The wording of the question may have varied, but the figures showed that a majority of "British people have been consistently against adopting the euro.

Date YES NO Unsure Number of participants Held by Ref
November 2000 18% 71% N/A N/A "BBC [37]
January 2002 31% 56% N/A N/A "BBC [37]
9–10 June 2003 33% 61% 7% 1852 "YouGov [38]
10–15 February 2005 26% 57% 16% 2103 "Ipsos MORI [39]
11–12 December 2008 24% 59% 17% 2098 "YouGov [40]
19–21 December 2008 23% 71% 6% 1000 "ICM [37]
6–9 January 2009 24% 64% 12% 2157 "YouGov [41]
17–18 April 2010 21% 65% 14% 1433 "YouGov [42]
2–4 July 2011 8% 81% 11% 2002 "Angus Reid [43]
9–12 August 2011 9% 85% 6% 2700 "YouGov [44]
10 August 2012 6% 81% 13% 2004 "Angus Reid [45]
Public support for the euro in the United Kingdom according to Eurobarometer polls[46]

Sterling zone[edit]

If the United Kingdom had joined the "eurozone, this would also have affected the "Crown dependencies and some British overseas territories that also use the "pound sterling, or which have a currency on a par with sterling. In the Crown Dependencies, the "Isle of Man, "Jersey, "Guernsey, and "Alderney pounds all share the "ISO 4217 code GBP. In the "British Overseas Territories, the "Gibraltar, "Falkland Islands, "British Indian Ocean Territory and "Saint Helena pounds are also fixed so that £1 in the local currency equals £1 in sterling. The "British Antarctic Territory and "South Georgia and the South Sandwich Islands do not have their own currencies and use the pound sterling.

When France adopted the euro, so did the "French overseas departments and territories that used the "French franc. The "CFP franc, the "CFA franc and the "Comorian franc, that are used in overseas territories and some African countries, had fixed exchange rates with the French franc, but not at par – for various historical reasons they were worth considerably less, at 1 French franc = 18.2 CFP francs, 75 Comorian francs or 100 CFA francs. The CFA franc and the Comorian franc are linked to the euro at fixed rates with free convertibility maintained at the expense of the "French Treasury. The CFP franc is linked to the euro at a fixed rate.

It was suggested that the sterling zone territories would, in the event of the UK adopting the euro, have four options:

"Gibraltar was in a different position, being within the EU as part of the UK's membership. If the UK were to have adopted the euro it might not have been possible to implement an opt-out for Gibraltar or whether it would have had a separate referendum.

Banknotes[edit]

Some private sector banks in "Scotland and "Northern Ireland issue "banknotes of their own design. The Banking Act, 2008[47] amended the rights of Scottish and Northern Irish banks to produce banknotes. This does not apply in "Wales which uses "Bank of England notes.

In November 1999, in preparation for the introduction of the "euro notes and coins across the "eurozone, the "European Central Bank announced a total ban on the issuing of banknotes by entities that were not national central Banks ('Legal Protection of Banknotes in the European Union Member States'). A move from sterling to the euro would have ended the circulation of sub-national banknotes as all euro banknotes of a given denomination have an identical design. However, as national variation is a requisite of euro coins, it would have remained an option for the "Royal Mint to incorporate the symbols of the "Home Nations into its designs for the British national sides of euro coinage.

See also[edit]

Notes[edit]

  1. ^ "Kosovo is the subject of a territorial dispute between the "Republic of Kosovo and the "Republic of Serbia. The Republic of Kosovo "unilaterally declared independence on 17 February 2008, but "Serbia continues to claim it as part of its "own sovereign territory. The two governments "began to normalise relations in 2013, as part of the "Brussels Agreement. Kosovo has received formal recognition as an independent state from "113 out of 193 "United Nations "member states.

References[edit]

  1. ^ a b c http://www.bbc.co.uk/news/business-40258449
  2. ^ "Parliament of the United Kingdom (12 March 1998). "Volume: 587, Part: 120 (12 Mar 1998: Column 391, Baroness Williams of Crosby)". "House of Lords "Hansard. Retrieved 13 October 2007. 
  3. ^ Treneman, Ann (24 July 2007). "Puritanism comes too naturally for 'Huck' Brown". London: The Times. Retrieved 2007-08-13. 
  4. ^ "No 10 denies shift in euro policy". BBC. 1 December 2008. Retrieved 1 December 2008. 
  5. ^ EUobserver - Britain closer to euro, Barroso says
  6. ^ AFP - Britain says no change on euro after EU chief's claim
  7. ^ "UPDATE 1-EU's Almunia: high chance UK to join euro in future". in.reuters.com. 2 February 2009. Retrieved 2 February 2009. 
  8. ^ "Make Way for Britain's New Coin Designs". Retrieved 2008-05-17. 
  9. ^ Poulter, Sean (29 June 2009). "Have you a 20p worth £50 in your pocket? Royal Mint error results in undated coins". Daily Mail. London. Retrieved 29 June 2009. 
  10. ^ Evans-Pritchard, Ambrose (21 December 2009). "The rise of Germany belies the chaos a strong euro is causing". The Daily Telegraph. London. Retrieved 26 May 2010. 
  11. ^ https://grapevine.is/news/2015/11/24/eu-position-on-iceland-adopting-euro-unchanged/
  12. ^ N.N. "FM: Our goal is to secure the status of EU citizens within the British Bases in Cyprus". Famagusta Gazette. Retrieved 28 June 2016. 
  13. ^ Tempest, Matthew (9 June 2003). "Britain not ready to join euro". London: Guardian Unlimited. Retrieved 2006-09-12. 
  14. ^ "Pound sterling (GBP)". European Central Bank. Retrieved 2009-12-25. 
  15. ^ "ECB: Euro exchange rates GBP". Ecb.int. Retrieved 2013-09-24. 
  16. ^ "ECB official rates against the British pound". "ECB. Retrieved 2008-11-19. 
  17. ^ Hutton, Will (16 November 2008). "It might be politically toxic – but we must join the euro now". London: "guardian.co.uk. Retrieved 2008-11-19. 
  18. ^ "Business | Pound hits new low against euro". BBC News. 29 December 2008. Retrieved 2009-04-16. 
  19. ^ Seeking bargains across borders, "BBC News 14 October 2008. Retrieved 6 January 2009.
  20. ^ 'Euro tourists' crossing border, "BBC News 22 December 2008. Retrieved 6 January 2009.
  21. ^ Salmond in call for euro rethink, "BBC News 4 January 2009. Retrieved 6 January 2009.
  22. ^ "ECB official rates against the British pound". "ECB. Retrieved 2011-01-01. 
  23. ^ O'grady, Sean (9 April 2009). "Weak pound heaps food inflation on poorest". The Independent. London. Retrieved 26 May 2010. 
  24. ^ "Weak pound triggers unexpected rise in inflation - The Scotsman". Business.scotsman.com. 2009-03-24. Retrieved 2013-09-24. 
  25. ^ Steed, Alison (4 November 2009). "Wild sterling fluctuations cost expat pensioners billions". The Daily Telegraph. London. Retrieved 26 May 2010. 
  26. ^ Howard, Bob (3 January 2009). "Holidays affected by weak pound". BBC News. Retrieved 26 May 2010. 
  27. ^ http://www.xe.com/currencycharts/?from=EUR&to=GBP&view=1Y
  28. ^ "Why Britain Shouldn't Join The Euro Zone". Forbes.com. Retrieved 2009-04-16. 
  29. ^ "The Euro and its consequences for the United Kingdom". Retrieved 24 September 2013. 
  30. ^ "Brussels bogey: pensions.(UK MOS skeptical of the European Union worry about unfunded pension liabilities)(Brief Article)". http://www.highbeam.com. Retrieved 2013-09-24.  External link in |publisher= ("help)
  31. ^ MacLennan, D., Muellbauer, J. and Stephens, M. (1998), ‘Asymmetries in housing and financial market institutions and EMU’, Oxford Review of Economic Policy, 14/3, pp. 54–80
  32. ^ "Exchange rate uncertainty, UK trade and the euro". Applied Financial Economics. 2004. Retrieved 2009-09-15. 
  33. ^ "The Euro and Stock Markets in Hungary, Poland, and UK". Journal of Economic Integration. 2007. Retrieved 2009-09-15. 
  34. ^ "What if the UK had Joined the Euro in 1999?" (PDF). papers.ssrn.com. 2005. Retrieved 2009-09-15. 
  35. ^ "Euro Membership as a U.K. Monetary Policy Option: Results from a Structural Model". NBER Working Paper No. w14894. 2009. "SSRN 1391841Freely accessible. 
  36. ^ Einaudi, Luca (2001). European Monetary Unification and the International Gold Standard (1865–1873) (PDF). "Oxford University Press. "ISBN "0-19-924366-2. Archived from the original (PDF) on 8 August 2007. Retrieved 13 August 2007. 
  37. ^ a b c "Most Britons 'still oppose euro'". BBC. 1 January 2009. Retrieved 4 January 2009. 
  38. ^ "YouGov Survey Results: The Euro" (PDF). Yougov.com. Retrieved 2009-10-03. 
  39. ^ "EMU Entry and EU Constitution". Ipsos MORI. 2005. Archived from the original on 2016-03-05. Retrieved 2009-05-23. 
  40. ^ "Welcome to YouGov" (PDF). Yougov.com. Retrieved 2009-04-16. 
  41. ^ "Welcome to YouGov" (PDF). Yougov.com. Retrieved 2009-04-16. 
  42. ^ "YouGov Survey Results: The Euro" (PDF). Yougov.com. Retrieved 2010-04-20. 
  43. ^ "AngusReid PublicOpinion" (PDF). Retrieved 2010-09-11. 
  44. ^ "Bloomberg poll". Retrieved 2011-09-15. 
  45. ^ "AngusReid PublicOpinion" (PDF). Retrieved 2014-06-27. 
  46. ^ http://ec.europa.eu/commfrontoffice/publicopinion/index.cfm/Survey/index#p=1&instruments=STANDARD&yearFrom=1999&yearTo=2017
  47. ^ "UK Parliament site". Services.parliament.uk. 1 April 2009. Retrieved 2009-04-16. 

External links[edit]

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