Analysis of the Euro

Analysis of the Euro

Analyzing the process leading up to the euro and the looking at the possible advantages and disadvantages that will result from the new currency are the key issues of this essay. The first section looks at some of the requirements leading up to the euro, including some of the specific fiscal goals required by the EMU regarding prospective members in 1999. The second section looks at some of the economic reasons for European Union countries to adopt the euro, focusing on the elimination of exchange rate fluctuations, increase trade overseas and across borders, and expanding markets for business as some of the advantages of euro currency countries. Price transparency, another advantage of the euro, is the focus for section three. Price transparency is the ability to easily recognize price differences between countries, which was not possible pre-euro. The paper then points on some effects of the euro on American businesses its economy. The updating of financial and accounting IT systems was the main adjustment discussed that U.S. multinationals must deal with. The paper then briefly looks at tourism, and how that industry of Europe is affected by the euro. The paper then looks at the euro introduction from a political standpoint, explaining if the EU goal of “political unity” is actually possible. The essay finally discusses the future of the currency, asking the question “Can the euro survive?”

January 1, 1999 marked the beginning of the euro as an accepted currency in eleven European countries. Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain all adopted this single currency, becoming subdivisions of a common monetary policy. On this date, the exchange rates of each of the participating countries were set, and the euro was officially recognized as the legal currency. The push towards the development of a common currency began in 1957, when the Treaty of Rome stated a common European market as an objective, hoping that “an ever closer union among the peoples of Europe” would inevitably occur. The approval of the Single European Act in 1986 symbolized and cleared the way for accelerated European integration and the completion of a single European market. Consequently, European governments and industry began to place greater emphasis on the competitiveness of European industry and on the reduction of barriers within Europe that hindered industry’s global economic competitiveness. The European Union went a step farther in 1992 in the Treaty of European Union, creating the Economic and Monetary Union (EMU).