The European Monetary Union (EMU) - The Euro as a Single Currency
Liberalizing trade is nothing new to the world, but we have never witnessed such a vast economic integration between sovereign countries like the integration carried out in the European Union. Customs duties between European countries started to come down steadily in the early 1950s and were abolished in 1968 with the introduction of a customs union and the implementation of the common external tariff. The official proclamation of the single market on 1 January 1993 marked the ending of non-tariff barriers to trade between Member States.
European Monetary Union will make it possible to complete European economic integration. The introduction of a single currency will mean price transparency, that is prices of goods can be directly compared on the markets of the participating Member States, which will merge into one market. Obstacles to trade such as the transaction costs, which add up to 0.4% of the EU GDP per year, and the exchange risk, will be eliminated. The competitive positions of companies can no longer be established by exchange-rate movements but will reflect productivity, inflation and cost differentials. This should permit a better allocation of capital and of available resources. The member countries will also be able to save administrative costs used for hedging operations. Over and above its positive effects on price stability and public finances, the single currency will make it possible to complete the single market and increase the benefits, which have already flowed from it.
Monetary Union will create an area within which national financial markets will become an integrated, wider and more flexible market. Financial institutions and financial centers will face new competitive conditions. The size of a specific national market will lose its significance. Competition will increase and could lead to greater harmonization across the euro area.
The introduction of the euro will have a great impact on the financial sector. This is because of three main reasons:
· The European System of Central Banks will be operating the single monetary policy in euro. So, it will be necessary for financial institutions to be able to operate in euro.
· Governments will issue all new debt in euro. Therefore, financial institutions, payment systems and clearing ...
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...ch the problems associated with the changeover to the euro will be resolved. Second, the national currencies of the EMU members are no longer independent. They are fixed to the euro. A speculation between currencies of the member states is pointless because this is equal to speculation with a currency of the same type.
The introduction of the euro in 1999 was an event, anticipated for a long time. Following, the euro has faced some problems due to the transaction period, but there is a strong belief that these problems will be easily overcome as the young currency accumulates power. Now that, the euro has become the official currency of the European Union (with some exceptions) there will be no more national currencies of the member states. In this way, we become witnesses of the highest level of integration among independent nations in the world history, when the European Union is expected to become the leader in the world economy.
Bibliography:
1. Kreinin, International Economics, 1991, Harcourt Brace Jovanovich
2. Cecchini, The European Challenge, 1992, Wildwood House
3. European Central Bank’s web site: http://www.ecb.int
4. EMU official web site: http://www.emu.int
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
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.
Economic integration is the joining of economic policies between different states/regions. This eliminates tariff and non-tariff barriers to the flow of goods, services and factors of production between the regions. Economic integration has varying levels referred to as trading blocs; these are a form economic integration. A trading bloc is a group of nations that have been made a bilateral or multilateral agreement. There are four types of trading blocs. The least advanced level is the Free Trade Area. The features of this level is that reduced tariff barriers between signatories, which at times are abandoned altogether and there is free movement of labour and capital and the non-member countries have an independent set of tariffs against member countries. The second level of economic integration is the Customs Union. This is a Free Trade Agreement plus a common external tariff. Member countries agree to reduce tariff barriers among themselves and they have in common, this is referred to as tax harmonisation. 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,...
Trade liberalization in Great Britain signaled an era of intense change in the European economy. The document that triggered this change was the Cobden-Chevalier Treaty of 1860. Anglo-French trade antagonisms had reached an agonizing level for the two countries, beginning with the Congress of Vienna and climaxing with the introduction and eventual repeal of the Corn Laws. For more than 30 years, Great Britain engaged France in tariff wars that only served to limit both countries’ trade potential. Accominotti and Flandreau (2008) describe this as a “period of generalized protectionism” (p. 152).
The presence of systemic risk in the current United States financial system is undeniable. Systemic risks exist when the failure of one firm may topple others and destabilize the entire financial system. The firm is then "too big to fail," or perhaps more precisely, "too interconnected to fail.” The Federal Stability Oversight Council is charged with identifying systemic risks and gaps in regulation, making recommendations to regulators to address threats to financial stability, and promoting market discipline by eliminating the expectation that the US federal government will come to the assistance of firms in financial distress. Systemic risks can come through multiple forms, including counterparty risk on other financial ...
The European Union today is a political and economic entity that controls in a single market located mostly in Europe exploiting Euro as a single currency uniting the vast majority of its members. The market that all European Union members share provides free trade of goods and services as well as a common external tariff. One might argue that the European Union would not perceptible its current influence had it not been for the introduction of the Euro. Speaking of the benefits of the Euro, one can name the elimination of exchange rate problems, creation of a single financial market, providing price stability, low interest rates as well as being a political symbol of unity and commitment to the Union. Today, Euro is the second reserve currency in the entire world - a fact that clearly speaks for itself of its value in the global market.
Many people would agree that Europe is a continent in which regions identify with each other even if they are not part of the same country. For that reason, as well as others, in 1957 the Treaty of Rome "declared a common European market as a European objective with the aim of increasing economic prosperity and contributing to 'an ever closer union among the peoples of Europe'" (www.euro.ecb.int). Later, in 1986 and then in 1992, the Single European Act and the Treaty of European Union tried to build on the previous treaty to create a system in Europe in which one currency could eventually be used all over the land under the heading of the Economic and Monetary Union. (www.euro.ecb.int) However, the question remains, why would the leaders of various European nations want to create one currency when the rights of national sovereignty have always been an issue for countries all over the world. Why, in 1998 did they create the European Central Bank, and why in "The third stage of EMU... on 1 January 1999, when the exchange rates of the participating currencies were irrevocably set" (www.euro.ecb.int) did eleven, and later twelve, countries link themselves economically in a way that has never been done before?
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).
What one can conclude by the scheme of things that the Euro is going to happen. What the out come will be and what effects it will have towards the economic world can only be speculated. The entire world will be watching as the largest economic experiment of our time unfolds before in front of us half way around the world.
These “Inner Six” nations thus laid the framework for further integration of other nations within the region and its supranational principles were what led to the creation of the European Economic Community in 1957, further assimilating the European countries’ economies. The creations of these communities for economic purposes were meant to promote cooperation amongst European nations to prevent the further outbreak of violence which had subsided with the end of WWII. Through these general agreements of economic importance came further integration through the creation of more agreements throughout the 1960s, such as the abolishment of customs duties amongst their borders, creating free trade and border trade tax pacts among the Inner Six and across their borders to other signatory nations.
The political force moved away from the painstakingly and time-consuming technique of multilateral tariff negotiations to smaller regional and bilateral provisions - the Regional Trade Agreement. In these arrangements; members accord preferential treatment , basically agreeing to liberalize the exchange of goods and services amongst each another giving regard to certain trade barriers. RTA is not the first-hand way of trade liberalization though. Initially, when multilateral trade discussions used to happen, two-sided and multiparty FTA”s filled the vacuum. There were restrictions from stringent and premeditated trade arrangements earlier, thus a lot of states are now moving towards freer trade for their own benefits.
Eurozone crisis has had huge impacts not only on the economy of the UE but also on the other countries who have economic and financial relations with the members of the union. The reason why we have decided to examine the Eurozone crisis in detail is to have a better understanding of the mechanisms behind this extremely important and complex problem and also to make accurate inferences about the solution alternatives. In our pape...
Firstly, what should be noted here is that international trade has been providing different benefits for firms as they may expand in different new markets and raise productivity by adopting different approaches. Given that nowadays marketplace is more dynamic and characterized by an interdependent economy, the volume of international trade has grown substantially in recent years, reducing the barriers to international trade. However, after experiencing the economic crisis that took its toll in 2008 many countries adopted a different approach in terms of trade barriers by introducing higher tariffs in order to protect domestic firms from foreign competition (Hill). Secondly, in order to better understand the implications of the political arguments for trade it is essential to highlight the main instruments of trade policy (See appendix 1).
After the failed International Trade Organization, Rodrik discusses the Bretton Woods Agreement, the transition from the General Agreement on Tariffs and T...
The first reason is the issue of euro. Considering a strong correlation between money and collective national identity, money can be used as an effective tool in facilitating the integration of diverse identities (Risse, 2003). Actually, the principal goal of the issues of euro is to promote the unification of the monetary system and foster integration of the economy in order to ease economic activities betwee...