Euro Pros

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The Ups and Downs of the Euro Introduction In an age of rapidly globalizing economies, when one country or society makes changes to its financial system, it can affect others as well. The Euro has brought a number of changes not only to the Euro Area, but to the rest of the world. The purpose of this essay is to discuss the advantages, disadvantages, future benefits and challenges that the Euro Area has brought and will continue to bring to the economy. Advantages of the Euro The Euro Area consists of 18 European Union member states and is run by the European Central Bank (ECB). The implementation of the Euro system has benefitted many of these countries. This includes integrating and growing the relationships between these European countries. For example, there has been a reduction in trade barriers between the Euro Area which means that net exports increased, 1 resulting in higher GDP levels. This is usually a good indication that the economy is doing well and will prosper. Other macroeconomic advantages include the fact that the transaction costs associated with exchanging different currencies are no longer there. 2 This is especially beneficial for smaller countries such as Slovenia, which relies heavily on net exports.3 It is also beneficial to consumers, because the decrease in exchange costs makes it cheaper for people to travel throughout Europe. Also, foreign countries may increase their imports and exports to the Euro Area because of the eliminated transaction costs, thereby fueling the economy further and growing international relationships. This means that the market will become more competitive which is better for consumers because they will have more options.4 It is believed that there would be more ra... ... middle of paper ... ... the benefits, as well as suffered through the difficult times, such as the financial crisis, as one unified party. Therefore, countries that wish to be part of the Euro Area must weigh the pros and cons. Once a country is part of the Euro Area it is difficult to terminate such affiliation legally and financially. Legally, there is an agreement that must be terminated and the consequences may be detrimental. Financially, there will be a decline in value of currency as an exit from the Euro Area would result in that country reverting to its local currency, which would be a fraction of the Euro. This would be a severe impact to its economy. Implementing the Euro can be useful to a country depending on its current economic state, size and financial position. The Euro Area will continue to grow and overcome its challenges, and spread the benefits of a sole currency.
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