5 Reasons Why Britain Does not Use Euro – The European Union is a government organization, from a number of countries in continental Europe. The European Union has its own currency called the Euro. This currency began to be used since January 1, 1999. But physically, this one currency is only used on January 1, 2002. So all members of the European Union, should use this currency. But do you know, if there are countries that do not use the Euro currency.
For example, Sweden is still using Krona currency. In addition, there are also British who are still using the Pound Sterling. Some people may be curious, why Sweden or the UK do not use the Euro. For this time we will discuss it. But we will discuss more, the reason why Britain does not use the Euro until now.Immediately we see 5 reasons why the UK does not use the Euro below:
Britain does not want to lose power to regulate interest rates
The first reason, the UK does not use the Euro is a matter of interest rates. So the British government, afraid of losing power in managing their interest rates. This can happen if the English use Euro, automatic interest rates in the UK will follow the Euro system. As a result the UK could lose the Poundsterling exchange rate, if they join the Euro system. Whereas all this time, the UK itself is quite comfortable and strategic use of Pounds Sterling, without having to melt with the Euro.
Britain does not want a decision in determining the monetary policy taken over EU members
The second reason is that England is afraid of losing its power. This is because if the UK uses the Euro, all decisions determining monetary policy will be taken over by EU members. This means that the British authorities will only be a stepchild, alias will not be able to give any effect on the policy. So all policies will be determined and decided by EU members. This is one of the strong reasons the UK does not use the Euro. They are afraid they will not have the power to determine each decision for their own country.
5 economic tests for the Euro are difficult to fulfill
In the 1990s, the Euro was conceived as a single currency for the European Union.At that time the British prime minister, Tony Balaire, declared about 5 economic test points. This is a requirement that must be met, before the UK can accept the Euro as their official currency. This economic test is a proposal from the UK’s finance minister, Gordon Brown. The contents of the 5 economic test points are as follows:
- Economic structure, business cycles and interest rates should be able to walk in harmony. So the UK must be able to survive with interest rates in the Euro zone
- There must be a system with sufficient flexibility to solve economic and aggregate problems in both regions
- Adopting the Euro as the official currency, meaning it must be able to create conditions conducive to individual companies and investments in the UK
- Internationally, the Euro will continue to enable the financial services industry in a competitive position
- Adopting the Euro as the official currency, it means lifting growth, stability and employment for the long term
These five economic test points that make Britain think long, to join the Euro. But there are also those who speculate, that these five points are deliberately imprinted. The goal is deliberately made to be difficult to fulfill. So that way, England will forever never join the Euro
Facilitate investor performance
Using Pound Sterling as a currency, settling more facilitate the activities of investors in the UK than to use the Euro. This is because, companies and investors in the UK are familiar with Poundstering. They just need, turning Pounds Sterling into US dollars and vice versa. In contrast to using Euro, they will be forced to adjust the Euro exchange rate.
Euro convergence criteria weigh on the UK
Before adopting the Euro, the British government must meet the Euro convergence criteria given to them. So the British government, should be able to maintain the ratio of dept-to-GDP in a certain level. This could potentially limit fiscal policy. On the other hand in 2014 alone, Britain can only meet 20 percent of the convergence criteria. This makes the British government feel very objectionable.