The Euro as a Common Currency

Topics: European Union, Euro, Eurozone Pages: 30 (11731 words) Published: April 12, 2012
Economic Policy Challenges from the Crisis

The Euro as a common currency

Oscar Guerrero Olivares
h1150248 Pages 3-16
Eric van Wickern
h1150045 Pages 17-33
Table of Contents
Economic Policy Challenges from the Crisis1
1ST Stage5
2nd Stage5
3rd Stage6
Economic Policies7
Monetary Policies8
Exchange Policy9
Fiscal Policies9
Market Policy of Work and Employment10
Microeconomic and Structural Policies11
Coordination between Countries and Economic Policies12
Advantages and Disadvantages12
Convergence of economic fundamentals17
Comparisons to other currencies24
U.S. Dollar24
Pound Sterling25
Reasons not to want the Euro26
Czech Republic28
Who’s paying for the financial crisis?29
The Future of the Euro30

The Euro is nowadays the common and official currency of the participating countries in the Economic and Monetary Union (EMU), which are those sharing the same market, the same currency and a unique monetary policy. Concretely, 17 member states form the economic and Monetary Union today. These States are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. The currency is also used by 5 other European countries without taking account of Kosovo, what leads to the fact that 327 million Europeans use this currency day after day. The five countries are: Monaco, San Marino, Vatican, Andorra and Montenegro. For this reason the euro-zone is formed by all those Member States which have adopted the euro as their common currency, in addition to Monaco, San Marino, Vatican, Andorra and Montenegro and the outermost regions of some of the euro-zone countries, for instance Guadalupe, the French Guiana, Mayotte, Martinique, San Bartolomé, San Martín, San Pedro y Miquelón y Reunión, which use the euro too. Within the European Union there are 27 countries. Ten of those countries are not part of the Economic and Monetary Union. Those countries are: Bulgaria, Denmark, Hungary, Latvia, Lithuania, Poland, United Kingdom, Check Republic, Romania and Sweden. Those countries keep their own currency and monetary policy.

It can be said that the Euro emerged from the endeavour of Helmut kohl, as he was chancellor of Germany (1982-1998) to unify Europe regarding politics and currency, setting the European Union in 1993 with the Maastricht Treaty. During his 15 years of German Chancellorship he contributed determinedly to the European integration process. His ambitious idea of a United Europe stayed in only a monetary union.

The creation of the Economic and Monetary Union is an agreement between the nations constituting the European Union in order to share a unique currency, a common economic policy and certain fiscal responsibilities.

With the completion of the Second World War the currencies of the world were located under the purview of the dollar. This power of the dollar and the depreciation of some European currencies caused the thought of an economic integration of the European nations in order to obtain a stronger common currency.

In 1969 the plans to create a common European currency started with the Barre Report.

After the creation of the European Monetary System (EMS) and the Exchange Rate Mechanism (ERM) in 1979, with the aim of unifying the European currencies, thus eliminating the possible fluctuations between them, the European markets began to be more united, eventually constituting the Single European Market. The only problem emerging in a single market was the exchange risk and the transaction costs associated with it, for this reason the idea of a common currency began to be considered as a good solution for these...
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