The euro, developed in the New Year of 1999, is the second largest reserve currency in the world. The Member States of the European Union form part of the Economic and Monetary Union, which is an advanced stage of economic integration based on a single market. The EMU involves close coordination of economic and fiscal policies and for the Member States that meet set criteria, a single currency. The euro was made to converge the currencies from the Member States of the European Union to one. Before a Member State can adopt the euro, it must fulfill certain economic and legal criteria. This criterion is designed so that the transition from currency can go smoothly and with little disruption. The euro is currently shared by 17 of the European Union’s Member Sates: Belgium, Germany, Ireland, Spain, France, Italy, Luxembourg, the Netherlands, Austria, Portugal, Finland, Greece, Slovenia, Cyprus, Malta, Slovakia, and Estonia.
To understand the adoption to the euro, it is important to understand the dynamic of the European Union itself. When the European Union was founded in 1957, the Member States concentrated on building a common market. However, this idea was short-lived as it was concluded that certain requirements of each Member State must be met before the market could grow and expand. These conditions are now referred to as the “convergence criteria” and include low and stable inflation, exchange rate stability, and sound public finances.
Aside from unifying the European Union in currency, the adoption of the euro was made to make traveling easier and for other economic and political reasons. The structure of the euro reinforces stability by contributing to low inflation and encouraging stable public finances. A single currency also provides efficiency as it accommodates to the common market of the European Union. In financing and investing, transparency is a key component for effectiveness; the euro does just that. It also eliminates costs,...
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