Analysis of The Financial Crisis in Europe

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The Euro zone was formed by the member states with an aim of economic integration and interdependence, which would only be achieved through peaceful cooperation of the European nations (Paul, 2009). This is a zone of monetary union where member states agree upon using Euro as the single currency. A monetary union is a zone in which members reach economic goals through mutual monetary policy and currency rate. The motion for its creation was introduced in 1962 and affirmed in 1969, in EU summit in Hague. It was to achieve its goals through three phases; “economic integration of EU member states, irreversible convertibility of currency and finally fixing permanent exchange rates (Alcidi, Gros & Oh, 2010). Even though there is consensus on the monetary policy in Euro zone, there is no agreement on mutual fiscal policy among member states. This zone has a current membership of 17 countries and there have been very many achievements made from the alleged benefits. Additionally, there have been challenges resulting to the financial crisis and also many future plans to improve conditions of doing business.

The first achievement of Euro zone in relation to reducing cost of doing business is that monetary integration resulted to lower transaction costs among member states. Such integration eliminated the exchanges between one currency to Euro and therefore, save resources. In businesses involving hand to hand transactions, this cost reduction has been more impactful as compared to using bank transactions. This is majorly because of imbalances in the advancement of bank systems among the member states. A study was done by the European commission and it was found that monetary integration would result to “savings in dealers’ margin of 0.4%...

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