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Euro Money

Updated February 20, 2020

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Euro Money essay

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.. able to compare the prices of similar items in different countries of the eurozone.2 Also people will not have the worry about of useless currency when crossing boarders.

The Euro will be legal tender throughout the EMU. For example, the Euro check will be exchangeable into any of the currencies within the”eurozone”.2 When they use Deutschmark checks within Germany they pay no exchange fees. However, when they cash these checks in Paris France exchange fees will apply An Euro check will be directly exchangeable with no exchange fees all around the eurozone.2 Other than seeing Euro figures on their statements business travels will not see much difference when traveling with the Euro. Regardless of whether travelers will be crossing the region or on their annual package vacation travel around the EMU will be different. With the introduction of the Euro major changes will take place to the international monetary system.

The European Monetary Union, EMU, will create an area that will closely resemble the Untied States in terms of magnitude of its domestic economy and its degree of openness.3 Accounting for about 18% of the world gross domestic product it mirrors the United States 18% as well. The eurozone accounts for 20% of world exports against 16% for the United States and 10% for Japan.3 When imports are worked into the equation the United States holds 19% compared to 16% of the EMU and 7% of Japan.3 Just by these figures the EMU is not just our silent friends across the Atlantic. In order for the Euro to become an international currency strength and stability of the Euro will have to be of essence. Inflation in the area remains low and government deficit are expected to decrease further under the provisions of the Stability and Growth pact.3 Americas net external balance, amounts owed overseas, continues to run large deficits while Europe has a roughly balanced international credit position and runs surpluses in its international accounts.3 (See graphs 1-3 below) Graph 1 Graph 2 Graph 3 (Graphs copied from AMUE Euro Newsletter No.

33: June 1998) The Euro financial markets will not only be larger than the current national European markets but also more diversified.3 Compared with the United States and Japan, the weight of equity and debt securities markets is lower and the relative importance of banking is far greater.3 With the implementation of the Euro a new equalization will be created within the global economy. In order for the Euro to become an international currency it will have to become strong and stable. Only these attributes will allow the trust of the global market to vest in the Euro. The stability and strength will have to come from the erouzone and its market, proving the stability of this newfound union. With the widespread use of the American dollar as an international currency and for holding reserves, it is unlikely that the Euro will replace it as the new international currency anytime soon. Europe does not have a centralized tax system to coincide wit the Euro so it may not be so well suited for a single currency union.

Maybe in the future as Europe becomes increasingly integrated will with its economies will it become the new currency standard of the globe. Many see the Euro as a positive development for Europe the United States and world economy. The European Economic Union will be the most ambitious economic projects undertaken in this century, but it does have its faults. These faults will have to be overcome or at least tamed in order for it to be a success. There are five major concerns that will have to be addressed. ? Sovereignty ? The Central Bank ? Transparency ? Who will be in control? ? Does one size fit all? Topping the list is the issue of sovereignty.4 Loosing ones national currency is equal to giving up its national sovereignty.

The overall position is not whether or not which face will be printed on the currency but is this one step too far down the road leading to political unification?4 Will all of the nation states be engulfed into a European super-state? What could be happening are the beginning stages of the United States of Europe.4 The second issue that is of most concern is the Central Bank. The European Central Bank, which has been conducting most of its business thus far in secrecy, is not winning many points of its constituents. Its seventeen-member council rules the bank. Six of them represent the ECB leadership; the remaining eleven make up the governors and presidents of the national central banks of participating countries.4 Some economists would like to see a more centralized system and argue that the bank is keeping too much power. With a system such as is in place, it might be difficult to react quickly in time of a crisis. One other factor is the built in majority that the individual national banks have, eleven to six, enabling them to gang up on the leadership if the situation presented itself.

Thirdly the lack of transparency is of major concern.4 By keeping its proceeding secret the council argues that the threat of political influence is reduced. If no one knows how a particular council member voted then they would not have to be taken to answer for it. Its seems with a policy such as the ECB is only answerable to is itself.4 Financial markets may be excessively nervous because they cannot gauge the governing councils true thinking. The fourth concern of the implementation of a solitary currency in Europe is that of who is in control?4 Officially the ECB is independent and answers to no political nation.

But can one council possibly have the ability to control and balance eleven different economies at the same time? Some say no, but if it can even succeed only a little bit what is good for one economy may not be good for another. This leads into the final concern: Does one economy fit all? When the economy is in the basement the first thing that politicians ask for is a cut in interest rates. In the beginning this may give the desired results but in the long run may entirely destroy an economy. It becomes macroeconomics versus microeconomics.4 What is good for the economy as a whole may not be good for every sector and region. 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.

Euro Money essay

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Euro Money. (2019, Nov 06). Retrieved from