When the euro was introduced in January 1999, the United Kingdom was conspicuously absent from the list of European countries adopting the common currency. Although the previous Labour government led by Prime Minister Tony Blair appeared to be in favor of joining the euro club, the current Tory government is not in favor of adopting the euro and thus giving up monetary sovereignty of the country. Public opinion is also divided on the issue.
Whether the United Kingdom will eventually join the euro club is a matter of considerable importance for the future of the European Union as well as that of the United Kingdom. If the United Kingdom, with its sophisticated finance industry, joins, it will most certainly propel the euro into a global currency status rivaling the U.S. dollar. The United Kingdom for its part will firmly join the process of economic and political unionization of Europe, abandoning its traditional balancing role. Investigate the political, economic, and historical situations surrounding British participation in the European economic and monetary integration and write your own assessment of the prospect of Britain joining the euro club. In doing so, assess from the British perspective, among other things,
(1) potential benefits and costs of adopting the euro,
(2) economic and political constraints facing the country, and
(3) the potential impact of British adoption of the euro on the international financial system, including the role of the U.S. dollar.