not part of the eurozone

Discussion in 'Economics' started by alekk, Oct 31, 2009.

  1. alekk

    alekk

    what are the main economics reasons why the UK does not want to be part of the eurozone ?
     
  2. there are a lot. first of all it will cost more.

    second they will be subject to the ECB and there monetary management. this means they will have one interest rate for the whole of eu this will affect uk as it has high levels of debt so a small alteration for other areas will affect the uk much more. it would be catastrophic think how highly geared mortgages are.

    third we would financial services and the forex would be affected.
     
  3. this website will help.

    http://www.brugesgroup.com/

    the guy in charge is called robert oulds he will probably be the best person to ask and will provide you docs if you are interested.
     
  4. alekk

    alekk

    @Morganist: thank you very much for your answer. I am totally new to economics, so may I ask you some more questions as I think I have not understood your answers:
    What will cost more ?

    Are you talking about the national debt of the UK. Isn't it very similar to many other countries in the Eurozone: debt of France,Germany ~ 70% of GDP, Italia has a national debt that is more than 100% of its GDP, etc ...

    What do you mean here? Does the UK make a lot of money on the forex market ?

    again, sorry again for these surely very stupid questions.
     
  5. there is a cost to be in the eu it will grow if we enter. i don't know the ins and outs you will have to go to the bruges group they have the figures. it costs something like forty million a day at the moment.

    in relation to the single interest rate. there is one interest rate for the whole euro zone. this means more highly in debt countries will be more affected by an interest rate alteration than others. we have. seventy percent of the private debt for the entire eu. also we buy houses and our economy is geared for that so an interest alteration will have a greater affect on our entire economy. the uk economy depends on peoples perception of wealth to sustain consumption the higher the value of the house the poorer they feel the less they spend. in france they rent more so interest rate alterations do not have the same affect on consumption.

    this paper is the guidelines that have to be followed to set the interest rate in the euro.

    http://www.ecb.int/pub/pdf/other/gendoc2008en.pdf

    it is different in the uk we follow one you can find at the bank of england site. they are different frameworks to set the interest rate and different procedures.
    i was supposed to write a paper for the bruges group about it but to do that i would have to discredit the interest rate itself. look at the paper at the seven techniques they use we use five at the moment the main three are the reserve requirement, open market operation and the discount flow window.

    the last point. the uk makes something like seventy percent of the worlds forex trades (probably more). so if the pound no longer exists i don't know how it will be affected. i think it is one of only things in the country that makes money now and perhaps why govs protect the financial services sector, which is enormous. so this is the problem do we know how this will be affected.

    one thing i do know if people are not changing from pounds, which is international exchange it will mean a lot of lost business. we could also see our purchasing power diminish as a result of using the euro and because we are a net importer it is not good. however some people say it will help because the euro is taking the place of the dollar (which is declining rapidly) so will be stronger than the pound. the trend over the last decade would indicate that look at the appreciation of the euro against the pound.

    also note when italy joined the euro the quality of life changed for the worse. this may happen in the uk. also note some people believe we will prop up the small states and end up being worse off. there are other problems too. first will we be powerful in the eu currently the germans have the clowt and we do what they say. the french ignore everything they are told to do and the italians have other problems. other problems consist of the outer european migration into the eu. which is argued again but some same it could affect economically either badly or well.

    hope that clears it up. i will be back in the forum in about 12 hours so i will reply then if you need further help.
     
  6. There's one interest rate in the EZ? Really? You get the same interest on German gov. bonds than on Italian or Greek bonds? Really? Wow!

    UK makes 70% of the World's foreign exchange trades? Really? WowWow!

    Italian quality of life decreased because of the euro? Really? Überwow!

    You blame a few thousand Eastern European immigrants for Britain's economic problems? When it is well known that the British economy has been supported by immigration for decades? Wow. You are awesome!
     
  7. My god, morganist, how desperately confused you must be!

    I didn't want to say anything, but I just can't contain myself. The incredible mix of some economic sense, on the one hand, juxtaposed with appalling ignorance of practical matters, such as the policy rate mechanisms, the money and the FX mkts, is absolutely mindboggling.
     
  8. here is a link to the ECB, which sets the interest rate.

    http://www.ecb.int/stats/monetary/rates/html/index.en.html

    it explains here. also if you recall the exchange rate mechanism attempted but failed in the case of Britain to keep interest rates within certain parameters which in itself is a form of interest rate control we could not meet those parameters so we left do you not think it would be the same now. yes we would not be able to operate correctly with the interest rate parameters set in the eurozone.

    can you please tell me what is wrong with my arguments in detail rather than just saying it is wrong. then i can reply to you response. it is your ignorance that concerns me. not the other way round tell me what institution you work for so i know never to invest there.

    will you please tell me what exactly i got incorrect in a two or three paragraph explanation that skimmed over the topic. how can you know how deeply i got something wrong if you only have a couple of sentences saying it. for example i said there would be complications due to the ecb setting interest rate parameters i did not say how there would be problems there could be problems that you are not aware of that i did not state. that is all i stated there could be complications on a wider basis that affects the wider economy yet you jump to a conclusion.

    you haven't backed up your arguments with anything you just say it is wrong. how.

    finally i only stated arguments made by other people in relation to the economic problems i stated some people argue and some don't to give an idea of the debates not my own personal opinion. read it again and you will see. in relation to the italian lifestyle being changed as a result of being the eu i will find a source.

    http://news.bbc.co.uk/1/hi/business/2977692.stm

    here us one there are others. the transition for italy in the euro was difficult people complained about the change in lifestyle.
     
  9. ok so the uk only trades 35 % of the forex however it makes up a large income for the uk.

    http://www.wisegeek.com/what-is-the-forex-market.htm
     
    #10     Nov 1, 2009