Costs and Benefits of Poland Joining the European Monetary Union.

These changes will in turn make companies more competitive, expand markets for businesses, as well as increase trade across borders. However, most importantly the euro is intended to create financial market stability within the participating countries. By eliminating the movements of exchange rate and all reference to them, the European Central Bank will control interest rates and inflation. This will lead to less uncertainty and create new opportunities for success.

What the Euro experience has taught us is that even countries which are not vastly different from each other in terms of economic health, can face a phenomenal crisis within just 10 years of the creation of the single union. How then would you expect a global currency encompassing countries with vastly different structures, in vastly different stages of growth and using vastly different means of managing their economies to be stable?

As of 2012, only seventeen of members of the European Union have decided to use Euros as their currency. In order for the members that adopted the Euro as their currency to successfully help their economic problems, the Eurozone members had to follow strict instructions put into place the European Union. The strict policies included strict control over inflation, government debt, and long-term interest rates (Mckee 525). The union put these strict policies into place to give the union the tools that it needed to take in order to help fix the economic crisis in each country participating in the Eurozone. Without the full cooperation of each country, it could cause the plans to fix the economic crisis within each country to fail because of the different interests by each individual country.

Whether the United Kingdom decides to join the European single currency and replace the pound with the euro will have profound economic as well as political effects on the country so is a very important decision and has considerable variations in attitudes towards the topic, although the British public opinion has consistently opposed joining the euro. The euro is currency shared by 18 of the European Union's Member States. The euro was introduced in 1999 and automatically became the new official currency of 11 States, followed by another 7 countries joining to date. However, the UK negotiated an opt-out to from the Treaty meaning they don’t have to adopt the common currency as they fit a certain criteria [1]. Joining the European single currency can have major advantages for the UK, such as diminished uncertainty of exchange rate for businesses and the decreased need to pay transaction costs of changing currencies when abroad. It can also have disadvantages such as loss of domestic monetary policy and variable rate debt in the UK.

A question reviewed on numerous occasions, weather the UK should join the Eurozone, considering what a currency union intakes, the benefits and costs, a judgment can be entailed weather the Eurozone would be a valid investment for an economy such as the UK. Exchange rate, capital risk, interest rates or any monetary policy and fiscal policies, shall be taken in to account when formation a judgment to weather the UK should become a member of the Eurozone. The heart of this case is revolved around interest rates and to whether it shall cause a great impact on the financial sector of the economy, as the UK largest revenue resource is from there banking sector.

This story is enlightening due to a clear overview of how a single currency with the ultimate goal of union and growth results idealistic as differences, not only regarding cultural and social backgrounds but also political ones, makes it very difficult for the Eurozone as a whole to have the same objectives and interests.

Average was a good thing to them. If there was too much departure from the average, it was looked on as bad. If the community average were 5 percent inflation, then a country with either 0 percent inflation or 10 percent inflation would cause strains in the system. All this economic coordination took place through a country's exchange rate, and was compared to the Europeans Currency Unit (ECU) fixed rate. The EMS continued its ways for fourteen years. In May of 1993 in Denmark, the Maastricht Treaty was finally approved. The treaty set out three stages of further transition to monetary union between participant countries of the European Community.

As the most principle stance in EU monetary architectures, the EMU has experienced an incredible institutional transformation under the tremendous pressures not matter from the EU or national levels. In Dyson’s (2000) observation, the EMU’s actual effects on European states began from 1 January 1999. However, the process for putting its conditions in place can be traced to the European Monetary System (EMS) in 1979, since when the specific

The European Union is not perfect. It has its own weaknesses and faults as well. Therefore, now I would like to write a short description about the mistakes of the monetary union. Then I put a question to all of us if the Eurozone, and especially the Euro, need to be reformed after the last years experiences. Finally – at the end of this subsection – I briefly summarize the negative effects of the crisis on the EU as a single currency area.

An economic downturn followed in the 1990s, and the Maastricht Treaty was seen as the response, to create a single market, monetary union and a common foreign and security policy . This was meant to create a ‘spill-over’ into other, weaker areas of the economy, helping all who were a part of it . The European Monetary Union (EMU) (1999) was a direct result of the Maastricht Treaty, leading the way for the Euro in 1999 . It was widely believed a common currency and shared markets would create a stronger place in the global economy, one that could potentially rival that of the United States . The proposed Eurozone demanded several criteria to be fulfilled by its potential member states before it could be created in 1998. This included: annual fiscal deficits no greater than 3% of GDP, accumulated government debt no greater than 60% of GDP, inflation no more than 1.5% higher than the average rate of the three least inflationary European members, and long-term interest rates no more than 2% higher than these same three . However, by 1997, only Luxembourg and Finland met the criteria . By May 1998, 11 countries joined, three met the criteria but declined to join, and only Greece was ineligible . The EMU was organized to accommodate diversity in financial and economic policy-making, however merging both financial and economic policies was

It is unlikely for the Euro to gain stability based on the current market movement and expected market movement in the next three months. With fed intervention, it is expected to see the Euro/USD exchange rate rise to 1.05, (Eurorateforecast.com, 2015). The Euro is expected to continue declining for the next three months and even in the foreseeable future. The declining rate has enabled currencies such as USD and Sterling Pounds to make gains against the Euro in a very substantial manner. The declining rate of the Euro/USD exchange rate is expected to follow the trend outlined below in the next three months. The Euro/USD exchange rate is expected to fall to 1.07 in a period of one month and then to 1.05 in three months. The latter will see the USD gain strength against the Euro, (Bank, 2015). The strength of Euro mainly depends on the desire of private investors to hold assets in Euros. The European Central Bank has failed to check the anti-inflationary measures that will assist in seeing the Euro strengthen against the US Dollar. The Central bank has also failed to maintain the price stability that has facilitated the continued deterioration of the Euro.

In an optimal currency area, significant changes in exchange rates are not necessary to ensure rapid macroeconomic adjustment European Monetary Union  one of history’s great economic experiments. Never before has such a large and powerful group of countries turned its economic fortunes over to a multinational body like the European Central Bank. Never before has a central bank been charged with the macroeconomic fortunes of a large group of nations with 325 million people producing $16 trillion of goods and services. While optimists point to the microeconomic benefits of a larger market and lower transactions costs, pessimists worry that monetary union threatens stagnation and unemployment because of the lack of price and wage flexibility and insufficient labor mobility among countries. The financial crisis of 2007-2009 is the first major test of this new monetary system.

1. Alesina Alberto, Silvia Ardagna, and Vincenzo Galasso. “The Euro and Structural Reforms.” Review of Economics and Institutions, Universita di Perugia, DipartimentoEconomia, Finanza e statistica, Volume 2, Number 1 (2011).

It is necessary to look at the state of the Eurozone economy in order to properly analyse the decision of the European Central Bank (ECB) on September the 4th to cut its benchmark interest rate to 0.05%, and to launch an asset purchase program to buy debt products from the banks at the same time. Since the collapse of Lehman in 2008 and the global crisis that followed, the Eurozone has been contracting significantly to the extent where “consumer price inflation in the Eurozone fell to 0.3% in September.” (BBC, 2014) The ECB’s reaction has been to reduce interest rates and make use of quantitative easing to try to generate economic growth, albeit without much success. In June 2014, when Mr. Draghi, the president of the ECB, announced its latest cuts to 0.15%, he stated that he couldn’t see the rates dropping below this level. And yet, merely a few months later, he announced a further drop to 0.05%, in what many considered to be a desperate attempt to help pull the Eurozone out of deep crisis. The example of Japan’s 20-year struggle with deflation and a contracting economy was the driving force that pushed the ECB to take this drastic measure. Therefore, it is important to analyse and evaluate the decision of the ECB, set in the context of the current European economic situation, and the alternative policies that could be used.

The European Monetary Institute was established in 1994 as an intermediary to create the European Central Bank (ECB) and a common currency for the member nations. The ECB, working since 1998, holds the responsibility of arranging and implementing a distinct monetary policy and interest rate for the espousing nations in union with their national central banks. The member nations including "Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain" ("European Monetary System," 2009) have incised their interest rates to an almost homogeneously near to the ground level since 1998. They did so in order to encourage development