The Pros and Cons of Adopting the Euro

1091 Words3 Pages
bulb-icon

Recommended: Disadvantages of the euro

Introduction
The European Union is an economic and political grouping of 28 member-states in Europe that forms a common market. The market has a population of around 509 million people with a DGP of $16.69 trillion (2012) accounting for 23% of global GDP and 20% of the world's imports and exports (EU, 2013). The union has its origins in 1958 through its predecessor European Economic Community which had six members (EU 2014). The current name was adapted in 1993 and ever since membership has increased to include countries that were previously viewed as non-European such as Turkey. In 1999, the union established the Eurozone as a monetary zone and was enacted in 2002 with the currency of choice named as the Euro. Of the 28 EU members, 18 members belong to Eurozone. The European Central Bank (ECB) was established to regulate the currency as a recognized legal tender in the market (EU, 2014,). This move for a single currency brought with it some benefits and costs to individual countries with some losing and others gaining as identified by relevant literature on the topic.
Benefits
The move to have a common currency in a common market eliminates the costs of currency conversion and fluctuation of prices owing to nominal exchange rate fluctuations. Differences in currencies have been noted as one of the most prominent hindrances to trade. Economist John Stuart Mill even once observed that
“So much of barbarism, however, still remains in the transactions of the most civilized nations, that almost all independent countries choose to assert their nationality by having, to their own inconvenience and that of their neighbors, a peculiar currency of their own” Angyal 109).
The move to have the Euro was thus intended to address this barbari...

... middle of paper ...

...other gimmick?
Journal of Financial Economic Policy. 1(4), 2009, 355-369
Christiansen, T. and Neuhold, C. (2013). Informal Politics in the EU. Journal of common market studies. 51(6), 2013, 1196–1206.
EU. European Union. 2014. 06/012014. Web. http://europa.eu/index_en.htm
EU. Speech - The Political implications of European economic integration – towards a political Union European Commission - SPEECH/13/923. 18/11/2013. 06/012014. Web. http://europa.eu/rapid/press-release_SPEECH-13-923_en.htm
Global Finance. 2012. 06/012014. Web. http://www.gfmag.com/gdp-data-country-reports/631-the-european-union-gdp-economic-report.html#axzz2shZ6K4Nm Sousa, J. and Lochard, J. Does the Single Currency Affect Foreign Direct Investment?
Scandinavian Journal of Economics 113(3), 2011. 553–578.
World Bank. European Union. 2014. 06/012014. http://data.worldbank.org/region/EUU

Show More
Related

  • How Did The European Union Outweigh The Costs

    393 Words  | 1 Pages

    The European Union has been helped economically ever since World War II. Right after World War II’s end, Europe was struggling to hold on. The countries of the modern-day European Union thought it would be a good idea to come together and help each others struggling economy. To this day, this decision has had a very positive outcome on the EU’s economy. As shown in Diagram 1, the European Union combined together has the world’s highest GDP at 18.3 Trillion USD as compared to the United States’ 17.4 Trillion USD GDP and China’s 10.4 Trillion USD GDP. The idea

    Read More

  • European Union Dbq

    573 Words  | 2 Pages

    In conclusion, the European Union has “merged” the countries of Europe. It has developed a common currency called the Euro’s, and a Parliament located in Belgium, Luxembourg, and France. Also, ALL of the countries of the Union are affected when one country is affected. This is important because the continent of Europe had become very weak after the wars and they needed to strengthen, and the European Union keeps the countries of Europe strong and economically fit.

    Read More

  • Benefits Of Uk Membership For The European Union Outweigh The Costs

    1531 Words  | 4 Pages

    The Common Market is the third level of trade blocs. This has features of the Customs Union plus free movement of capital and labour and some policy harmonisation such as similar trade policies to prevent certain member countries having an unfair advantage. The European Union is an example of a Common Market and is an economic and political partnership that involves 28 European countries. It allows goods and people to be moved around and has its own currency, the euro, which is used by nineteen of the member countries (The UK excluded). It also has its own parliament and sets rules in a wide range of areas such as transport,... ...

    Read More

  • The European Union: Economics, Policy and History’ by Susan Senior Nello

    1724 Words  | 4 Pages

    The book we are discussing in this essay is called ‘The European Union: Economics, Policy and History’ by Susan Senior Nello. This book takes into account the different disciplines of economics, policy-making and therefore including a great deal of politics, and the history of the institution of the European Union as we know it today. The broad multi-disciplinary perspective makes this a comprehensive book that combines different aspects together making this particularly useful in the current debate about the future of the European Union. The main focus of the book are the policies of the European Union which is the authors’ speciality having worked on various projects for the European Institute in Florence and having advised the European Commission (McGraw – Hill). This book is a good introduction to the on-going debate concerning the progress and developments of the European Economic and Monetary Union. The author does not use a lot of technical terms and if she does they are explained which makes this book perfect as a study-book for students who want to enter this debate and want to be able to carefully structure their arguments. The authors’ main argument is question if the European Economic and Monetary Union is an optimal currency area. Robert A. Mundell is usually seen as the theorist behind the Optimum Currency Area theory. He defines an optimal currency area as “a domain within which exchange rates are fixed.” (177). Susan Senior Nello uses the Optimum Currency Area theory’s criteria whether the European Union is an optimal currency area and addresses what the advantages and disadvantages of being part of a Monetary Union are.

    Read More

  • Margin of Appreciation in ECHR

    2445 Words  | 5 Pages

    Tom Newton Dunn, ‘Go to the war on the Eurom Law’ The Sun, 7 February 2011accessed 29 March 2011 http://www.thesun.co.uk/sol/homepage/news/3395471/David-Cameron-urged-to-go-to-war-over-Euro-law.html

    Read More

  • The Benefits Of The European Single Market

    770 Words  | 2 Pages

    To start with, what is the meaning of the Single Market? According to European Commission website, Single Market indicates the EU as one territory that has no internal borders or any other controlling complications that lead to the free movement of booth services and goods (The European Single Market - European Commission, 2017). According to the same source, single market has great benefits. It encourages competition and trade, increases efficiency, promotes quality, as well as helps in cutting the prices. In addition, the same source considers the European Single Market as one of the EU’s ultimate accomplishments that powered the economic growth and made the everyday life of European businesses and consumers easier (The European Single Market - European Commission, 2017).

    Read More

  • Is the EU Democratic?

    1496 Words  | 3 Pages

    ...: Reassessing Legitimacy in the European Union. Journal of Common Market Studies, 40 (4), pp. 603-24.

    Read More

  • Does The Eu Have A Federal Character

    921 Words  | 2 Pages

    The EU is a union of sovereign European states who share sovereignty based on treaty. The union also possesses competences in policy sectors with exclusive jurisdiction in the area of Economic and Monetary Union while others are shared with Member States (MS), the other powers belong to MS as derived from the conferral of powers art 5(2) TEU, 2(1) TFEU art.3 & 4 TFEU additionally other powers have been offered by the decisions of the European Court for direct effect on citizens

    Read More

  • Difficulties of a Single Monetary Policy for a Large Number of Countries

    1835 Words  | 4 Pages

    Rose, A. (2002). One Money, One Market: Estimating the Effects of Common Currencies on Trade. Economic Policy 30, 9–45.

    Read More

  • The Treaty of Paris: Neo-functionalism

    1505 Words  | 4 Pages

    George, S. and Bache, I. 2001.Politics In the European Union. Oxford, UK: Oxford University Press.

    Read More

  • Is Religious Fundamentalism Always Totalitarian and Prone to Violence?

    1863 Words  | 4 Pages

    7th edition. London: Pearson Longman, ed. Garner, R., Ferdinand, P. and Lawson, S. (2009) Introduction to Politics. 2nd edition. Oxford: Oxford University Press, 1998.

    Read More

  • The European Crisis

    1202 Words  | 3 Pages

    The talk of the Euro has been a central debate for economists, since its introduction in 1999 to the tough times it faces today. It was brought in to stimulate growth by increasing trade and creating more integrated financial markets for investors. It allowed member states to forgo exchange rate fluctuation risks and costs, which meant more economic stability and growth. However the EMU was set up, without any exit strategies in place , in order to portray a sense of strength to investors. This seems to be currently hampering Euro Area growth rates with its inflexibility to deal with asymmetric shocks which are yet to be back to pre-crisis levels (see figure 1). Policy makers within the ECB are struggling to create fiscal and monetary measures that will stimulate growth, and brings into question the viability of the Euro as an optimum currency within Europe. This was already shown by the failed reforms of 2010.

    Read More

  • Global Currencycy Essay: An Introduction Of The Single Global Currency

    2089 Words  | 5 Pages

    Single global currency also known as one world currency is used for all transaction around the world. Central bank will produced and also supported the single global currency. There are few global currencies such as US Dollar, British pound, Japanese Yen, and Euro. During the World War II, US Dollar has been the main currency which has the greatest global output and trade worldwide. But after the Euro appeared, it successfully has became a single global currency which is playing a big role on the worldwide trade and world outputs which now competing the US Dollars. Euro is the second largest world currency which is also known as common currency and also is a stable currency which is now

    Read More

  • The History of Money and Banking

    1178 Words  | 3 Pages

    In the beginning of the human kind, there was no money. The only way to get what you want is to trade what you have for it. This system is called bartering. Sometimes, you will find a person who is willing to exchange your goods. However, most of the time, it is really difficult to find the person who is willing to trade with you. Since, you desperately need to exchange, you will need to travel the whole day until you meet the right person. In this type of situation, it will take a lot of time to find the person who wants to trade with your goods. Economists defined this kind of issue as transaction costs. It is the time and effort people spend before they can exchange their goods. In barter economy, the transaction costs are incredibly high. Another major drawback of barter system is that people cannot measure the value of goods. This usually leads to conflicts since people have to make unequal exchanges. In order to reduce transaction costs and conflicts, people developed commodity money.

    Read More

  • The Foreign Exchange Market

    1006 Words  | 3 Pages

    The foreign exchange markets allow the conversion of currencies, where it helps the firms to conduct trade more efficiently across the national boundaries. In addition, firms can shop for low cost financing in capital markets all over the world and then use the foreign exchange market to convert the foreign currency that they got into whatever currency they require. With the foreign exchange nowadays, anyone can go to other country by converting their domestic currency into the foreign currency. The foreign exchange will follow the rate of exchange according to the country's rate. But still, the foreign exchange market is actually dealing with fluctuation where sometimes it has upward and downward movement.

    Read More

More about The Pros and Cons of Adopting the Euro

Open Document