Europe the Second Superpower
What Effect Has the Euro had to the EU?
The introduction of a single monetary currency in the EU has had different effects on each individual state choosing to adopt the Euro. On the 1st of January
2002, 12 member states were introduced to the Euro, rendering currencies such as the Deutschmark, Lire and Franc illegal tender. To understand the full impact of the Euro, one has to discuss the reasons behind the introduction, and understand the effects and impact a single currency would have on the economies of the countries as well as the impact it has on the largest single market, in terms of trade and labour.
There were clear benefits of having a single currency such as promoting cross‐ border trade and enhancing investment within the Euro zone, however detractors also argued that the consequences far outweighed the benefits suggesting that the Euro would create instability on a macroeconomic level, influencing inflation rates and fluctuations “in aggregate supply and demand.”
(Healey 1999)
The formation of the EU, highlighted the importance of a central economic policy.
The introduction of a single currency would allow Europe to partially achieve this by encouraging interstate trade and ridding of any trade tariffs that may still exist, this was achieved through the 1986 Single European Act, “the EU set about dismantling the remaining non‐tariff barriers to the free movement of goods, labour and capital.” (Healey 1999) A partial economic union sped up the process of introducing a single monetary union, as Mundell states, ”a common market without common money is at best an imperfect market.”
Introduction of EMU
The introduction of a new currency is subject to a number of criteria and comes at a huge cost to each country involved. The risks involving the introduction of a new currency are massive, not only for individual countries but also for the economic survival of the EU, thus
The introduction of a single monetary currency in the EU has had different effects on each individual state choosing to adopt the Euro. On the 1st of January
2002, 12 member states were introduced to the Euro, rendering currencies such as the Deutschmark, Lire and Franc illegal tender. To understand the full impact of the Euro, one has to discuss the reasons behind the introduction, and understand the effects and impact a single currency would have on the economies of the countries as well as the impact it has on the largest single market, in terms of trade and labour.
There were clear benefits of having a single currency such as promoting cross‐ border trade and enhancing investment within the Euro zone, however detractors also argued that the consequences far outweighed the benefits suggesting that the Euro would create instability on a macroeconomic level, influencing inflation rates and fluctuations “in aggregate supply and demand.”
(Healey 1999)
The formation of the EU, highlighted the importance of a central economic policy.
The introduction of a single currency would allow Europe to partially achieve this by encouraging interstate trade and ridding of any trade tariffs that may still exist, this was achieved through the 1986 Single European Act, “the EU set about dismantling the remaining non‐tariff barriers to the free movement of goods, labour and capital.” (Healey 1999) A partial economic union sped up the process of introducing a single monetary union, as Mundell states, ”a common market without common money is at best an imperfect market.”
Introduction of EMU
The introduction of a new currency is subject to a number of criteria and comes at a huge cost to each country involved. The risks involving the introduction of a new currency are massive, not only for individual countries but also for the economic survival of the EU, thus