Britain - In Our Out Term Paper

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This, in turn would have a negative effect on the labor market, resulting in a sharp increase in unemployment.

While part of the goal of the EMU is for market convergence that will country-specific implications of EMU economic policies, there is no evidence that this will be true of the mortgage markets where people physically live, so Britain would be left with economic instability.

What type of British companies would most likely benefit from joining EMU?

Any company that exports to another Euroland country will no longer have the cost of converting one national currency to another. Multinationals also save money if all their subsidiaries trade in the same currency. Further, companies won't have to worry about exchange rate fluctuations and all will have access to a larger, more transparent market that will bring down prices and make firms better able to compete internationally.

Some believe that joining the EMU would help small -- and medium-sized enterprises and the tourist industry the most. Unlike larger companies, many have not had access to customers in Euroland or access to the Euro investor market. So, for the first time, small-and-medium sized companies will have access to Euroland markets and financial resources.

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The tourist industry should be boosted by the elimination of currency transaction costs between participating countries.

Some large multinational warned that they only chose to invest in Britain on the assumption it would ultimately adopt the euro. Why would multinationals be interested in Britain joining the Euro?

Multinationals favor Britain joining the Euro because it would simplify their accounting and reduce the risk to their earnings from fluctuating exchange rates. Multinationals that have invested in Britain are at a big disadvantage when trying to sell their exports to Euroland because of the strong value of sterling over the euro which has frequently made their exports more expensive than those of competing firms in other countries. The multinationals favor a single currency as a way to reduce the risk associated with currency movements and as a way to remove currency disadvantages for their exports. Further, as Euroland becomes more powerful it will have more economic clout and being outside this framework could become a major disadvantage. The multinationals want to be on what they perceive to be the winning….....

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