Does Great Britain have to adhere to the euro?
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The landslide victory of Tony Blair's New Labor party in general elections in June 2001 put the question of the accession of Britain to the Economic and Monetary Union (EMU). From the beginning of his first term in 1997, the Prime Minister committed to conduct an assessment of five economic tests. These were set by the Chancellor of the Exchequer Gordon Brown, in the two years following the reelection of the Labor Party. To avoid alienating voters, Tony Blair has largely ignored the subject of the euro during the last legislative campaign.
This caution was confirmed after the elections, replacing Robin Cook, who was a pro-European, by Jack Straw at the Foreign Office. Subsequently, Gordon Brown was to provide an assessment of five tests, in which a positive response should lead to a referendum within four months. Mr Brown rejected the results that were announced on June 9, but there was no referendum on the single currency in the following weeks. Why was there such a reticence of the British vis-a-vis the euro, when most Europeans are satisfied with their common currency?
The comprehensive and prospective study of the British economy actually reveals that, if membership seems advantageous according to EU criteria, the benefits are much less obvious from the strict point of view of Britain, given its specific economic objectives. Joining the euro should not be regarded as contrary to British interests: the risks of joining the EMU may be largely mitigated and compensated for long-term economic convergence and increased political influence enhanced in European Union (EU).
The formal accession of EU countries in the EMU depends on several criteria set by the Maastricht Treaty:
? the independence of the concerned central bank;
? participation of its currency the exchange rate mechanism (ERM) over the two years preceding the examination of the situation by the European Council, without severe tensions, coupled with a stable exchange rate;
? an inflation rate not exceeding 1.5% over that of the three EU countries with the lowest rate over a period of one year before the examination;
? the average nominal interest rates in the long term not exceeding 2% over the average rates of the three EU countries that have the best results in terms of price stability during the year preceding the review;
? sound public finances, that is to say a public deficit not exceeding 3% of GDP and public debt not exceeding 60% of GDP (exceeding these limits is permitted only in exceptional and temporary, and the two ratios must have substantially decreased in the period preceding the entrance examination).
Tags: Tony Blair's New Labor party, Economic and Monetary Union, British economy, Maastricht Treaty, European Council, substantially, stable exchange rate