MINI CASE: WILL THE UNITED KINGDOM JOIN THE EURO CLUB?

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 current Labor government led by Prime Minister Tony Blair appears to be in favor of joining the euro club, it is not clear at the moment if that will actually happen. The opposition Tory party is not in favor of adopting the euro and thus giving up monetary sovereignty of the country. The 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 European Union as well as that of the United Kingdom. The joining of the United Kingdom with its sophisticated finance industry will most certainly help propel the euro into a global currency status rivaling the U.S. dollar. The United Kingdom on 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 the British participation in the European economic and monetary integration and write your own assessment of the prospect of British joining the euro club. In dong 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.