ion of the Euro will lead to the elimination of these barriers and should increase the potential supplier base. There are some fears that amid the confusion of the conversion of currencies to the new Euro some businesses might seize the opportunity to raise prices but this should only be able to occur on a short-term basis as the conversion period settles.Tony Blair’s labour government has declared that there are no political barriers of entry that should prevent Britain from adopting the Euro and the only tests to be applied are those of economic advantage.Gordon Brown, Chancellor of the Exchequer stated (financial Times Oct 2001), “The government is pro-Euro because we believe that in principle membership of the Euro can bring benefits to Britain.”In October1997 the chancellor laid out a set of five tests to apply, which will assist in the process of deciding whether or not Britain will benefit, these conditions will be assessed in June 2003.If the government decides that the conditions have been met it has promised that it will put British entry to a referendum soon afterwards. The five tests that will be applied are:•Is there suitable convergence between the UK and the eurozone economies?•Is there sufficient flexibility to cope with economic change?•Will it encourage or discourage companies from investing in the UK?•What will the impact be on the financial services industry?•Will it be good for employment?The test of convergence suitability is to determine whether Britain in similar enough to the rest of Europe to be able to live with the same interest rate. To judge this test the government will compare inflation rates, the speed at which economies have been growing and whether Britain responds in the same way to unexpected economic shocks such as sudden rises in oil prices.The second test is related to the first because if the ECB sets the interest rates either too low or too high fo...
