POUND AND EURO

Advantages and Disadvantages of UK pound and Euro

Advantages and Disadvantages of UK pound and Euro

Introduction

United Kingdom got considered to be the heart of the Global Financial Crisis (GFC). The recent credit crunch had a massive impact on the output of UK. In the short term, the investments were dramatically below the base as a result of the credit crisis, and consumption was also adversely affected. The effect of the shock had a downward pressure on the levels of prices. The central bank of UK reacted to the crisis by reducing the interest rates. However, the productivity level of the Euro economy had a negative effect and the people are still suffering in the PIIGS nations. The European Economy still on the verge of downfall and countries are not performing well at all due to various factors. Thus, the Euro currency is not appreciating and not doing well in the global economy. However, UK pounds are comparatively better than the Euros.

Discussion

UK balance of payments deficit in the second quarter fell to its lowest level in three years, due to increased income from investments abroad. Balance of payments deficit declined in the second quarter to 2 billion pounds compared to 4.1 billion pounds(UK National Statistic hub) in the first quarter, this shows that the decision UK euro membership was the right one. As a result, the index was at a record low point in the first quarter of 2008.During the first quarter of last year current account deficit stood at 6.9 billion pounds. The value of the index for the first quarter gets adjusted downward to 4.1 billion pounds compared with the initial value of 9.4 billion pounds.

European Central Bank said that the balance of payments for the euro area back to the height last July for the first time in more than a year, recording a surplus of $ 6.6 billion Euros (UK National Statistic hub) which includes 9.6 billion dollars. The last time the balance of payments recorded in it up in February 2008 amounted to $ 2.6 billion Euros, this increase in BOP asserts it again that UK membership of euro was the right decision. It is noteworthy that the calculation of payments is the account that records the value of the rights and debts arising between a country and the outside world, as a result of exchanges and transactions that arise between the residents in this country ...