Gordon Brown's 5 Economic Test for Joining Euro
As Gordon Brown approaches his last budget as chancellor many are reviewing his tenure as Chancellor and evaluating his success or failure. One important contribution he made was to steer the UK away from joining the Euro on the ground that "it would not be in Britain's economic interest". The justification for this was based on his 5 economics tests.
Before deciding whether the UK should join the Euro the Chancellor, Gordon Brown drew up 5 economic tests which the
5 Economic Tests for Joining the Euro
- Economic Harmonisation.
economy must be harmonised with the Euro zone. If the UK economy was growing much faster than EU then UK interest rates would need to be higher. For example, at the moment if the UK joined interest rates would fall and this may cause inflation. Therefore it is essential that the UK has a similar economic cycle to UK Europe. Even if there is temporary harmonisation there is no guarantee it will continue on a permanent basis.
- Is there sufficient Flexibility?
went into recession could it be able to cope? It would have no influence over Monetary policy but also Fiscal policy is limited by the growth and stability pact. This limits the amount of government borrowing and therefore limits the scope for expansionary fiscal policy. UK
- Effect on Investment.
Would joining the euro create better conditions for firms making long-term decisions to invest in
? Britain inward Investment has not suffered since the UK decided not to join UK
- Effect on Financial services.
What impact would entry into the euro have on the
's financial services industry? UK as a financial centre has boomed in recent years. London
- Effect on Growth and Jobs
Would joining the euro promote higher growth, stability and a lasting increase in jobs? There is no clear evidence that it would.
economy has done better outside the Euro than in the Euro. UK
At the moment the weight of economic opinion is that the
Subscribe to future posts