European Monetary co-operation has historically been inspired by two main motives, which today remain the major reasons for the adoption of the Euro:
1) To enhance Europe’s role in the world monetary system. By speaking with one voice on monetary issues, EU countries hope to defend more effectively their own economic interests in the face of an increasingly self-absorbed United States.
2) To turn the European Union into a truly unified market. A consistent goal has been to remove all barriers to trade and become a huge unified market on the model of the United States.
Despite Britain choosing not to adopt the single currency, we still benefit from many of the economic trade advantages while retaining our powers of Sovereignty.
The Eurozone countries are currently in financial crisis and even though those countries may be far away geographically-speaking, they are closing in.
The Eurozone still remains Britain’s major trading partner amounting to about 50% of our GDP and it is the largest consumer of our exports. A hit in Europe is a large hit to our goods and services. Any bailout will involve British banks, negatively impacting the UK deficit. When the London banks face trouble, exports will be hit. The City of London keeps cash moving through the economy and in an extreme case the Treasury could order the Bank of England to finance its borrowing needs by printing more money (‘Quantitative Easing’). Members of the Eurozone cannot benefit from this advantage. This would then leave us with an inflation problem as opposed to debt defaults. Either way, problems in Europe are undoubtedly our problems too, the worse the problem gets, the more we will be affected.
How ironic that Greece is the weakest member of the Eurozone, having been bailed out on more than one occasion. The modern Olympic Games originated in Athens in 1896 – it would be fortuitous in 2012 if the Olympics gives a significant boost to the UK economy and became the start of the recovery the country is looking for.
About the Author
William Sharman is Britain’s top 110m hurdler, currently preparing for the Olympic Games. He maintains a keen perspective on key issues relating to business. William has a BA in Economics from Leicester University and an MSc in Banking and Finance from Loughborough University.