UK: Is it time to join the €uro?

Discussion in 'Money & Investing' started by Bananas, Dec 5, 2008.

  1. Bananas

    Bananas Endangered Species

    Back in 1999 the single European currency was born and by 2002 it had comlpetly replaced many of the traditional currencies. Many of the new member states either are in different stages of joining in the next 3 years.

    This is all with the exception of Denmark, Sweden and the UK who opted not to sign up to the €uro for various financial incompatibilities, although EU legislation says that they are obliged to join, certain loopholes enabled them to keep their own monies for the time being.

    Currently Denmark is about to hold a refurendum to switch currencies from the Krone (DKK) to the €uro, seeing as the DKK is pegged to the €uro and determined by the European Central Bank (ECB) in Frankfurt anyway it would seem to be the logical thing to do.

    The UK is different though, the Pound Sterling(GBP) is not pegged to the €uro and is controlled via the Bank of England(BoE) in London. It has though often shadowed the €uro and risen and fluxuated in relative unison. That is until now!

    The credit crunch and Global financial crisis is hitting the UK very hard, interest rates are being slashed left right and centre and are now at 2% (last time they were at 2% was post-war 1951...put this in perspective the UK still had food rationing and was effectivly war-bankrupt in 1951). It is predicted that even more cuts will follow.

    The UK is suffereing badly as it is a island nation that makes its money primarily from the financial sector and has a secondary industry in engineering, mainly supplying aeroplane and automobile parts for the French and German industries. Basically industry sectors that are either crashing or stagnating in the global downturn. The UK is not self sufficent, it needs to trade it wares(car parts and insurance) to buy its food, clothes and other produce. We have oil and gas and a few other resources but nowhere near enough to sell on.

    The consequence of the all above is that the UK economy is crashing, the value of the pound is falling fast and is at an alltime low to the €uro and has not been this weak to the dollar(US) for many years. If it continues as it is, by March 2009 the €uro and the pound will have a 1:1 ratio and the dollar not far behind, compare this to earlier this year where the £:$ was 2:1 and the €:£ was 1.4:1

    Basically there are hard times ahead for the UK, the question now being asked is will it be better to crash and burn on our lonesome or to consider going €uro to soften the blow and take on the hardtimes as a collective unity? Will the ECB be any better than the BoE?

    Can the £ survive? It is the worlds third biggest money reserve but is loosing its investable value at a rate of knots.

    The only positive that can be gained form this is as the pound looses its value, UK exports become more affordable, this would be a good thing as sales would increase, the problem being though is people are not buying whatever the price! Perhaps if we hang on to the pound when the markets recover; the pound will be a very attractive currency compared to the €uro and Dollar for a while making the recovery for the UK quicker and the bounce bigger. Would the bounce be big enough to recover the loss made in the downturn where we are having to buy goods to survive at a 30% mark up, how long will this continue?

    Here are a few articles on the subject:

    Jeremy Warner: Sterling was far too high. Now it may be going the other way - Jeremy Warner, Business Comment - The Independent

    Battered sterling tumbles towards parity with euro | Business

    Financial Advice UK - UK economy News - Is the UK set to join the euro?
     
    Rebeccaaa and ysabel like this.

  2. ysabel

    ysabel /ˈɪzəˌbɛl/ pink 5

    We suffered from inflation when we converted. But it could also be because FF value is lower than €. 6.55 FF = 1 €

    But really, those who were against the conversion to French Francs (FF) to Euro (€) were mostly for personal than global reasons.

    - having to convert (you're used to prices and budgeting in £, with a new currency it will become more difficult because you have to reconvert everything). Although it's been seven years we've been using the Euro, some people still estimate big amounts (rentals, properties, etc) in terms of FF, in their minds. They cannot easily grasp the value when given a Euro figure. You say "it's easy, just multiply xxx" but it takes spending more time to do it and it's a boring process too.

    - sentimental reasons (love for the FF, the money you're used to all your life...and it's going to disappear - a sad thing)

    - nationalistic reasons (some people don't really identify with being European Union member; they are loyal to France and changing the FF to € is like a loss of national identity).
     
    Bananas likes this.
  3. Bananas

    Bananas Endangered Species

    My true colours are with the Eurozone. The only reason I could ever see with sticking with the pound is its value as a reserve currency. However.....now the €uro has strength, if it could take on board the Pounds share it would be a much stronger contender to the dollar (eg. if #2 & #3 get together they can be #1).



    This is a good arguement for doing the change now, any minor ripples would not be felt under the grand scheme of things, we are drasticly deflating at the moment!

    Another good arguement for doing the change now. We are nearly at the 1:1 ratio, if they cant convert that then they should not be allowed money.

    It is sad, but you cant let your heart rule your brain, especially when money is involved.

    Patriotism goes out the window when Im the one paying for it.

    At the end of the day the French are still French, the Irish still Irish and the Germans still German. You all have your own market share of the €uro with a coin denoted to each country, you all control your own laws and taxes and fiscal systems, you are no less the people you were before, if anything the unity highlights the unique differences and has made nationalism stronger.
     
  4. ysabel

    ysabel /ˈɪzəˌbɛl/ pink 5

    Actually it IS the perfect time to change when your standard rate would be 1:1. They cannot complain about confusion. I don't know though how they come out with the exchange rate for each. I imagined they took into consideration the entire treasury/currency of participating countries, then came with a base calculation to be used for each. But that was starting point. Would you know if the other latecomers had the current forex rate when they joined Euro or is it another rate?

    I mean, for example, while the forex would say next month that the £ = €, if the news come out, or not just news but when UK joins the Euro zone, wouldn't that affect the estimated value of Euro and therefore your fixed exchange may no longer be 1:1? But then of course, granted it could change it still wouldn't be as bad as 6.55 or some other complicated multiplier. :hah:
     
  5. Bananas

    Bananas Endangered Species

    I think they would fix it at a set time. Thats what they do with the other €uro n00bs.

    If they could of fixed it 5 months ago I'd be comparativly richer. If the £ does reach a 1:1 with the € and the govt refuse to join the €uro, if it then fell to .99:1 or lower at the first opportunity available I'd be joining you on that side of La Manche.
     
  6. Nixola

    Nixola Boom Boom Pow!

    here is the thread you so badly wanted banans *prod* lol

    I dont think Britian should move the the Euro to be honest.... i like the £ and believe that if we change to the euro we will lose some of our identity, then there is the whole getting used to using the euro. i know that the euro is stronger than the £ at the moment, but i just dont like the idea of going to the euro, its dosnt appeal to me. i dont think most of the europen should of joined the euro... every country should have their own currency...but if the UK does change to Euro then there is nothing i can do about it and i will just have to accept it
     
  7. Bananas

    Bananas Endangered Species

    1.00 EUR

    =

    0.950187 GBP


    XE - The World's Favorite Currency and Foreign Exchange Site

    The gap is closing at an increasing rate. Nearly at the 1:1 ratio!!!!! it wont be long before it happens.

    Bloomberg.com: Europe

    22% :dazed: Hindsight is a beautiful if not depressing thought..... if only I'd put my money in a European bank 12 months ago.

    Heres arough example of the money and how much it has changed:

    If I put £1,000 in a European bank in Jan08, I would of recieved roughly €1,350, if I left it alone until Dec08 and moved them back to a British bank I'd of recieved £1,300.

    £1000 > €1350 > £1350 = £300 profit

    even if you'd invested in €uros last week you could of made 2.8%.

    £1000 > €1030 > £1028 = £28 profit



    This is all good news for British exporters and visitors. There has been an influx of French and Irish festive shoppers in the UK the past couple of weeks. My own family that deals in exports have seen EU trade rise from about 55% to 80% of overall business.
     
  8. English-Emo-Boy

    English-Emo-Boy Supreme System Lord V.I.P. Lifetime

    The Euro and the Pound is virtually in parity so I feel now is the best time to make the change.

    Do I think we'll turn to the Euro in the near future? No, the government is set against it and I think the public in general are against it too.
     
  9. ysabel

    ysabel /ˈɪzəˌbɛl/ pink 5

    Oh great. I should have waited to make my purchases from London. :lol:

    Yeah, I heard the current government is against it but there's someone very much for it that has a position in politics now and might be able to influence people to do have a change of heart. Until when do you have Brown?
     
  10. Bananas

    Bananas Endangered Species


    We are stuck with him until June 2010 at the latest.:( There is a chance that there will be elections in June 2009.

    The current Government(Labour) are more inclined to the €urozone than the Conservatives who are the next most likely candidates for office. The other party the Lib Dems are traditionaly pro-euro (at least to call a referendum on the subject) but in recent months have done a u-turn on this policy. I wont be voting for any of them although my vote could be swayed with potential €uro promise.

    It looks unlikely that the UK will join the €urozone, the most probable route of entry would be for the current Labour government realising they have nothing to loose to force it through without public consent. This would be a knife in the side though and would loose them a lot of the for life voters(Similarly we have a lot of people who will NEVER vote conservative because of the Thatcher era).

    At the end of the day most tabloid reading Brits just dont want the €uro. aLthough a new wave of eurocentrisism is creeping in with the damned if we do and damned if we dont attitude is a big cheese tyrant in London any different than a big cheese tyrant in Frankfurt?
     
    Last edited: Dec 19, 2008

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