Ap Euro Research Paper

Some would say the European Union is the modern day Soviet Union and now with the introduction of the euro, it has succeeded in what the Soviets could not dare to accomplish. How amazing that a single currency could change the fate of Europe and bring it back to a super power that it always was. In order to stand up to the influential nations of this world the European Union did the unthinkable, created the euro. While others would agree, as predicted by many financial analysts, the creation of the euro currency was one of Europe’s greatest accomplishments. The establishment of the European Union (EU) in Europe created an alliance whereby it would be greatly constructive as a nation to be strengthened economically, politically and ideologically, with a one level currency. Hence, the introduction and final association with the euro was established on January 1, 1999. This currency which was used primarily for trade and deficit diminutions was now established as the main foundational monies of all the European countries involved. Through this cooperation and attainment, the European Union gained strength in the economic frontier through consumer and business initiatives and frontiers. Basically, the EU was on the verge of bankruptcy and in order to save this great nation the euro was adopted and procured. Yet many member states did not regard the euro as their main currency, they feared the issues surrounding

the loss of tradition vs. financial unilateralism within a national economic dilemma. Even though the euro brought the EU back to the forefront economically it also brought inequity and inequalities amongst member states and other countries.
The euro provided an economic advantage within the European people.

Travelling and business was made easier since they did not have to exchange currencies, and more importantly, the European trade agreement allowed for currency control to be less risky. For example, before a European citizen would have to identify the market price of a good and then use a currency converter. Since the euro was formed this allowed markets to be more transparent, less risky and more fair competition between member states. This allowed efficiencies and business development

throughout

the entire EU. However, many controversies erupted as smaller nations felt larger nations were highly in favour. Although many accounts of this showed that the larger nations were benefiting heavily, the smaller nations were advised that the European Central Bank would take care of their needs and demands. The central bank would balance the entire member nation’s equality, being impartial and not susceptible to political pressures and therefore inflate currency to help the small nations meet their requirements.
Moreover, Europe before the euro went through an exchange rate meltdown. Countries within Europe became victims of altering their own currencies in order to meet short-term economic objectives and goals. Within this process these countries were still expecting other nations to honour these unrealistic exchange rates. Indeed, the euro has removed much of this corrupted style exchange rating system; it makes fair trade easier to be trusted since the same currency is allowed in all sectors. Currently seventeen EU member states are joined and involved. European integration was needed and mandatory as over 300 million citizens use this currency and enjoy the benefits it exhibits. The euro replaced the Deutschmark and the Franc and consists of countries such as Belgium, Germany, Ireland, Spain, France, Italy, Luxembourg, Netherlands, Austria, Portugal, Finland, Greece, Slovenia, Cyprus, Malta, Slovakia and Estonia.
The European Union is known to many by the collaboration that started this one nation currency. Its unique advanced stage of economics based on a single market within all the member states involved. When the EU was founded in 1957 its objectives were to create a common market. The complexities behind the currency issues, as well as political and ideological shifts, created many issues and challenges. Over time, it was evident that tight economic and monetary integration as well as co-operation was needed for both internal and external markets to strengthen and grow. The drafting in 1992 was created (Maastricht Treaty) which created the criteria and ground rules for member states to apply and be accepted. These convergence criteria included low and stable inflation, sound public finance and exchange rate stability.
Apart from making currency exchange easier amongst nations, being part of the European Union and having one active currency makes total economic and political sense. Just think about it, the framework under which both of these criteria is managed contributes to stability, low inflation and upholds sound public finances. Therefore, a single currency is very logical towards a single market economy, internally, or a complex trade economy, externally, making efficient plausible. A common currency increases transparency within price and exchange rates, eliminates costs incurred by exchange duties, facilitates trade negotiations and enables the EU a powerful representation in world markets. The strength and size of the euro with the backing of the central bank protects it from certain external economic shocks such as unexpected oil prices, agriculture and electricity prices within the trade and currency markets. It is important to stress the fact that currency exchanges are very crucial, $1.00 exchange rates multiplied by 1 Billion is a huge difference in price, and can even cause a nation to go under.
A single currency offers tremendous advantages. Not only are varied risks and exchange costs eliminated, but a single currency allows a close co-operation amongst the other members involved. It was clear to Europe that a single currency as in the euro was the economic and monetary pivot that would lead to a developed and flourished nation, greater prosperity and jobs for all of Europe. These benefits outweighed any traditional notion that now Europeans have their own sign of identity through its currency. They included a focus on economic stability and growth through consumer and business mandates. For example, economic stability is vital for economic development and business growth as it allows governments and business to forecast expectations. Economic stability also allows businesses to reduce uncertainty and encourages investment opportunities. This allows room for citizens to seek more employment or better paying jobs. Economic stability also allows countries to do business with trade and development. An attractive euro, backed by the central bank with co-operating nation states, allows the global economy to reach its highest potentials.

The opportunities the euro offers to the consumers are very beneficial and advantageous. What was before a difficult process of transactions through instability, transparent influx and currency deprivation amongst countries has now become lower costs through transparency, economic stability and stable prices. These consumer benefits are very direct and consist of simplicity to compare prices during shopping; others are indirect and require long term remunerations that economic stability brings to interest incurred from mortgages and bank loans. All in all, the vast opportunities the single currency offers are enormous in the everyday transactions of Europeans within the improvement for their quality of life. A single currency has the power to create competitive markets, stable prices, easier and safe borrowing, lower travel costs, more growth in jobs both private and public sector and greater public investment opportunities.

Increased price transparency with a single currency has spawned competition and growth between shops, suppliers and manufacturers. This has kept a downward pressure of prices in the European area. What is very important to note is that this price competition and stability has conveyed inflation levels to stay very low. During the 1970s many EU countries had high inflation rates, some up to 30%. Inflation fell drastically as they were preparing for the euro, and since the introduction to this single currency it has remained at 2%. With low inflation and price stability, this gives the citizens purchasing power with the value of their savings being better protected, allowing for the future to look more certain for the people in the euro area economy. The European Central Bank as mentioned earlier helps to lower the rate of inflation and interest rates for certain smaller member states. This is important since it gives everyone the fair advantage to use funds effortlessly and cheaply.
Even the costs of exchange rates have disappeared amongst member states and this allows for cheaper traveling, vacation, education and even the most important business. During the 90s in Europe, a person travelling through Europe would have to exchange money at every border and basically lose a significant portion in exchange rate calculations without purchasing a single good or service. A traveler today who starts with 500 euros would basically return home with the same amount if they travelled through euro distinguished member states.

The benefits of the euro are brilliant. Not only can one see the advantages within the EU, but with businesses and big corporations the possibilities are endless. The confusion of currencies and the mix match of the exchange does not even bypass companies anymore. Therefore, within the single market with a single currency, it has spawned business to come into Europe for growth and earning potentials. Companies such as Mercedes and BMW have already outsourced their manufacturing plants across EU member states. This has tremendously helped families get jobs they would not have normally had in the farm lands. 10 million new jobs have been created, compared to 1.5 million in the previous decade. Citizens and business have benefited from unabridged loans, government funding with low interest and the pressure and support for investment and infrastructure development. This has been the focus in order to improve growth, spending, welfare, pension system and to reduce tax within the nation of EU.
Within the realm of commerce, not only does the euro encourage cutting costs and risks, but it places high priority on investments and business planning. This allows business to be more effective and trust that the EU will help them grow and succeed. A great benefit of the euro is that within the EU, businesses do not need to work in different currencies. A company can buy and sell and be paid in the euro. Before, companies had to account the risk of fluctuating exchange variables, as the invoice or payment might be changed due to currency levels. This became a determining force for many businesses on not to engage in commerce with Europe since export prices could be higher, or the fear of a surprise due to fluctuating interest fees. Most companies felt it was safer to deal with a single currency such as the dollar; however, the risk has now gone. These exchange costs were quite substantial over 20 billion, as much of it was incurred when companies transferred goods. Now this money is available for more productive investments since companies have saved a fortune.

Hence, without exchange costs, the risks associated with cross border trade and international trade has flourished. Companies within the EU can offer better service and lower costs. E-commerce and trade have estimated to increase by 20% since the introduction of the euro, single currency. Healthier planning, improved borrowing and more investment ideas have become sound judgment.
The euro is a symbol of union and European identity. It is a symbol that states can gather together in order to create shared consensus of values and ideals. The euro covers a wide spectrum of economic, social and political pressures that has been resolved with this single currency. This has allowed the people and companies to explore freely and to achieve success. This currency is not only for the states to work together, but the greatest goal of economic convergence and solitude through political commitment. Although the huge debate of the European debt crisis has emerged, the EU has made arrangements to strengthen the Growth and Stability Pacts, and introduced a checks and balance system in order to prevent and correct imbalances that are increasing. Yet, many feel that the euro has been a huge negative impact of the economy. Not every member state feels that it has been fair; more than half of French, Spanish, Italian and German citizens feel that the introduction of the euro has been very bad for the economics of their country. Not only do they feel like they lost out, they feel that they lost heavily during the currency conversion. They feel the middle class has been greatly being impacted, when the rich have not lost a significant amount of money due to the size and level of their bank accounts. Hence, only 5% of adults in Italy and France believe the euro has been a positive impact for their economy. Most of the negative feedback is coming from migrant workers, who have come to Euro-zone areas due to the strength of the euro, hence freezing and cutting the wages. In Germany around 75% of the growth in the labour outsourced with migrant workers has brought the level of wages down to 55% with a substantial decline.
The Russian businesses and corporations have also felt the negative effects of the euro. Over 60% feel that it has drastically impacted their business. The reasons are due to the strength of the euro as other countries are scared to do business since it is too costly. Other countries can find cheap labour or goods elsewhere such as in China or Korea. Russia’s volatile markets are being highly affected by these external issues let alone their internal issues with the euro debt crisis.