The Pound Versus The Euro

Posted by Allison on 1 April 2009, 16:05

A few years ago talk was rife about whether or not Britain would finally give up the pound and join the Euro.  Nowadays that talk is somewhat muted, especially given the current situation regarding inflation, rising interest rates and something of a struggle in Euroland regarding its strength and ability to stave off what could be an impending recession.

So what will happen?  Has talk of converting to the Euro died down completely, or is it just that we have more pressing currency matters to worry about at the moment?

If you take a look round the internet for some information on this subject you will soon see that the opinions and disagreements are all still there.  There is a fascinating article on Economics Help which goes into great detail on why they believe we won't become a part of Euroland, and it is very easy to understand the reasons given when you compare the site to many others that are rather too heavy handed.  You can read the full article by going to http://www.economicshelp.org/2007/03/why-uk-will-never-join-euro.html.

It's also interesting to stumble over other articles that were written before the Euro was actually launched, such as this one by Eurocoins.co.uk.  Reading the information given in the article at http://www.eurocoins.co.uk/britaintheeuroshouldbritainjoin.html is fascinating given what we know now.

But the question still remains as to whether we will ever join.  It seems unlikely given the current climate that any serious discussion will take place in the foreseeable future.  Perhaps when the danger of recession has passed (whether it actually occurs or not) and the interest rates come back down we can then think again about this vexing topic.

The problem is that now the Eurozone is having trouble keeping inflation and interest rates down, the effects are being seen in some of the member states.  Could it be that a world recession could actually blow apart the single currency altogether?

It seems unlikely but it should be noted that no single currency has ever been successful for very long in the past.  It might sound negative but why should we expect it to last for the foreseeable future this time – especially if a full blown recession does take hold?

If that did indeed happen, what would the fallout be like?  Would we see the member countries adopting their old currencies once again?  The truth is that if the Euro did cease to be for any reason, going back to the old currencies wouldn't be a simple process.  As it is once you have joined the Euro you cannot opt out again, so if things did take a nosedive all the countries involved would be tied to it until the very end.

Of course this is all speculation, but it is interesting to theorise about what could happen – and more importantly where Britain would be if we did join the Euro, or if we didn't.  It would be foolhardy to assume that we wouldn't be affected at all, even if we did choose to keep the pound, but given the current state of the economy at large it is fair to assume that there are still some ups and downs to come – and very possibly many years before the pound is no more.

If it were ever to happen at all.

 

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