The Euro

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The Euro

The new international currency of the European Economic union, euro became the national currency on January 1 2002. In this union where only euro is valid as currency includes Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxemburg, Netherlands, Portugal and Spain and their national currencies will cease to exist. Before the euro formation, there existed the gold standard and the Bretton Woods system. Both were aimed at the internal and external stability. These policies collapsed when the two goals diverged.

Since the euro eliminates the exchange rate problem and focuses more on the internal stability by unifying currency, the policy target dichotomy can be resolved. Even though nothing like euro has been established before, it was formed to benefit the European economy by controlling the budget deficit, by having a more stable government, and by creating an even closer union among the people of Europe thus there are many benefits that will allow euro to exist in the long run. The formation of euro has increased the importance of internal stability such as price stability and employment.

The Europe’s move to euro must stand on a foundation of stable government policies. The stability will cause lower prices, lower interest and create more jobs and investment. The internal stability should be build from the inside and not pressured from the outside by fixed exchange rates, ”Monetary stability had to be built at home” quoted by Heinz-Peter SpaHn. By uniting Europe the “home” area has expanded. The articles in the Treaty on European Union clarifies that the budget deficit cannot exceed 3% of countries gross domestic product by establishing very clear surveillance procedures. The deficit ...

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...sizes and colors and posses identical designs in all 12 countries. This makes it easier for a foreigner to recognize the bank note.

The formation of euro can have two outcomes. It is either the great experiment like the critics says or it will succeed in the future and stabilize the economy by focusing on the internal balance. By increasing trade and reducing trade restrictions Europe will be more integrated. The increase in competition will benefit the growth of the economy. For economy to expand there have to be new innovations. To have new innovations, there have to be experiments in the economy. The introduction of euro is completely new in our economy and it is a great experiment that will succeed and promote the overall economic growth. This is not a short run move. Euro needs time to develop so that the beneficial results should be seen in the long run.

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