Your Money. Personal Finance. Your Practice. Popular Courses. Markets International Markets. Table of Contents Expand. Five Economic Tests. Other Reasons. What Are Euros? What Is Brexit? The UK has kept the British Pound because the government has determined the euro does not meet five critical tests that would be necessary to use it. With Brexit looming, the pound looks like it is here to stay, but the UK leaving the EU will have financial and economic consequences on both sides.
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Investopedia does not include all offers available in the marketplace. Related Articles. Macroeconomics How the U. Dollar Became the World's Reserve Currency. Partner Links. A first is that the EU is far from being monolithic in its construction. Consider the eurozone; not all EU member states are in it, but a number of non-EU dependent territories and micro states are effectively members, while Kosovo and Montenegro have adopted the euro as their sole currency without any official agreement and therefore without issuing rights.
Consider similarly the Schengen area; not all EU member states are in it but a number of non-member states are de facto members the EFTA countries, for example. Seen from close up, the EU is variegated in appearance. A second is that, although the EU tends to place emphasis on the momentum of the integration process, that process is not consistently unidirectional.
Territories do leave occasionally Algeria in , Greenland in , the UK in Lastly, countries do decide against full membership on occasion; in their different ways, Norway, Switzerland and Iceland, for example.
A third general observation is that states decide what is best for themselves according to their own democratic devices and traditions; Switzerland is in EFTA, for example, but not in the EEA.
These relationships result from various referendums where the Swiss and Norwegian people have expressed their democratic point of view. In , in a referendum, the Norwegians decided against membership of the EEC.
In there was no such tradition for referendums in the UK, which subsequently became a member state of the EEC through a parliamentary act. Had there been a referendum in , the country would almost certainly not have joined the EEC. But by referendums had been constitutionalised notably under the Political Parties, Elections and Referendums Act , so that the use of a referendum to settle the EU membership issue — once Parliament had given its approval — could not be presented as an aberration.
In this context, frustrated Remainers should note that the Norwegian people confirmed their position by a similar margin in a second referendum in — twenty-two years after the first. Fourth, when countries decide what is felt to be best or most comfortable for themselves, there are always trade-offs to be made between competing interests, with advantages and disadvantages on both sides of the balance.
There are demonstrable economic advantages to full EU membership, but many would argue that there are all sorts of political, constitutional, democratic, sentimental, cultural, historical and geographical considerations to be considered as well.
Earlier this year, in her seminal work, The Brussels Effect: How the European Union Rules the World Oxford University Press , Anu Bradford convincingly demonstrated how, through sheer dint of the size of its market and its strong regulatory institutions, the EU unilaterally regulates global markets. From this point of view, as Bradford put it at a recent LSE seminar, whatever it thought it was doing, the UK has effectively swapped rule-making for rule-taking.
I suppose I hope I am mistaken. If true: this is terribly old-fashioned and I would have thought virtually unpublishable. Or are women just too exceptional to have views? Smaller EU member states were impressed by how the EU has stood behind Ireland in the disputes with the UK over the Irish border, which had raised concern about the peace process, he said.
Other divisions did not ricochet into Brexit talks. During the negotiations, even seasoned diplomats admitted the Brexit process had taught them new things about the EU single market and customs union. EU leaders ignored concerns of the incoming Biden administration when they signed a trade deal with China last December, although the pact looks unlikely to come into force. While many mourned the British departure, Brexit made it easier for the EU to make progress on long-stalled policies.
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