As I have already stated the UK is one of three EU members who has not yet joined the Euro. Of these three Denmark had a referendum in 2000 as to whether they should join the Euro at its introduction

in January 2002 to which the answer was ‘no’. Sweden is expected to vote ‘no’ at its impending plebiscite and Britain is still waiting to set a date for an expected referendum. Britain’s current stance is that they are waiting for Gordon Brown’s infamous ‘Five Tests’ to be met. Therefore, if we are to decide whether the UK should join the Euro these tests must be looked at in detail.

A major argument for immediate entry by the UK is the greater influence they will have into how the EMU forms and the possibility of it being more beneficial than it would be if entry were left for years. Also, it can be argued that by not entering early Britain will be marginalized and her influence in Europe eroded.

Of the Five Tests, two appear more important than any others as, if they are passed then other tests are met by default as admitted by the Chancellor in early June. These two tests are convergence and flexibility and are apparently inseparably linked to investment and the overall effect on the UK. It seems that if the targets for convergence are met then investment will be a result. This will happen because if Britain’s economic structures and business structures become more like those of Eurozone nations then the incentive for investment in the UK is the same as it would be in the rest of the Eurozone, thus “creating better conditions for firms considering investment in the UK” than if the UK were not in the EMU. The flexibility of the labour market would also be likely to affect whether or not firms would be willing to invest in the UK. We also can see how the overall effect to the UK economy would be affected by the first two tests being met as, convergence towards the same business structures found in the Eurozone would most likely require growth and an increase in the flexibility of the UK economy should ultimately lead to growth and less unemployment in the long term. One problem for the Chancellor, however, is the fact that currently Britain is far more flexible than most of the Eurozone and so to converge as required in test one will probably require jobs to be sacrificed in the UK which would e a problem both economically and politically (more important for Brown).

The reason that the Five Tests

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