History And Current State Of The Country 's Economy

The Euro and its Impact on the U.S. Economy The euro is the official currency of the following 12 European nations: Belgium, Germany, Greece, Spain, France, Luxembourg, Ireland, Italy, The Netherlands, Austria, Portugal, and Finland. Although it has been the official currency since January 1,1999 it became physical tender which can be used by all participating countries on January 1,2002. The introduction of the euro into the world was truly a historic event; it represented a unity never before seen in the history of Europe, a common currency. After years of negotiations and much skepticism from around the globe, the implementation of the euro is no longer an abstract ideal, but a change that nations, corporations, and investors must

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.

The euro is not the currency of all EU Member States. Two countries (Denmark and the United Kingdom) have ‘opt-out’ sections in the Treaty excusing them from involvement, while the rest (numerous of the more recently agreed EU members plus Sweden) have yet to meet the situations for approving the single currency.

The EU sought to simplify trade within European neighbors and to replace national currencies with a single shared currency that could compete with the dollar on the global stage. The members of the newly-formed European Union agreed to a fixed currency conversion rate when the Euro was adopted (Scheller). Initially, the EU only had 11 members, but membership has since grown to 25 member nations. These 25 member countries operate within what is called the Eurozone, over which the European Central Bank sets economic policy

The euro maintained a low interest rate, causing Spain to run on deficit on its current-account balance. Public revenues and outputs also began to fall, while increasing public spending, transformed budget surplus into budget deficits. Within the country, the Spanish economy itself and its once-stable economy banking system suffered tremendously. Due to the unpredictable waves of its economy, Spain continues to fail in predicting when the crisis will attack again and if recurrence will take place (Ordonez, 2012). At the peak of the global financial crisis, GDP fell and unemployment rose, coinciding with products breakdown and jobs destruction. Housing investment was a major affected component. Household saving rates were reduced to a minimum, while fixing their capital investment at a maximum. Such behaviors resulted in high household debts. With the weakness of household incomes and the long-term debt amortization for home purchases, these all hindered the rapid depletion of liabilities (Cruz, 2011).

Spain illustrated the fact that the euro zone 's problems, are the disciplined of government over borrowing and overspending. Even Greece, Portugal and Italy have huge debts but at least the Spanish government tried to control its borrowing that it ran a balanced budget every year until the financial crisis in 2008. Spain had a rapid economic growth before 2008, but it start to off when they start to borrow more. In contrast, Germany, continue to

Spain is one of the powerful state with an expanssion economy in EU from 1995. His GDP was growing year by year without any problem , but in 2007 the economy of Spain start to fall down, because of a collapse in Housing Market, that can lead to a recession or a slowdown.

The European Union launched the economic and monetary union (EMU) of Europe on January 1st, 1999. January 1st of 2002 marked the establishment of a single currency through the introduction of euro bills and coins to 12 EU states. Formally called the “eurozone”, the movement to a single currency has developed as 18 EU member states currently use the euro. Desiring further political integration, the EMU was designed to maintain price stability through a central bank known as the European Central Bank (ECB). Although economic certainty was the goal, a financial crisis that erupted within the eurozone lead to questions about the credibility of the EMU. The debate over political integration was furthered by the introduction of ideas for increased fiscal federalism, similar to the current policies within the United States currency union. For a monetary union to succeed, a fiscal union is necessary to solve the vulnerabilities of the EMU and supervise national policy to prevent macroeconomic imbalances throughout Europe. However, the dispute over political centralization impedes the establishment of such a fiscal system within the upcoming decade.

In 1999 seventeen countries in the European Union adopted the Euro forming a Euro Area. With the adoption of the Euro these seventeen countries discontinued their old currencies and monetary policies. Monetary Policies

The Treaties of Rome which established the European Economic Community in 1957 announced that a Single European Market was the aim of the development which would accelerate prosperity and contribute to a closer union of the European nations. The Single European Act (1986) which launched the European Single Market programme and the Treaty of the European Union is based on this foundation. The treaties lead to the Economic and Monetary Union and are the cornerstones for the coherent currency. The third step towards the EMU began at the 1st January 1999, when the conversion rate was irresistibly locked in. From then on all the member states operated in a unitary monetary policy. The Euro was established as the legal means of payment and at first the eleven national currencies were reduced to subunits of the Euro. Greece joined the Euro system on 1st January 2001 and finally the European paper money and coinage were introduced to the 12 member states of the European Union on 1st January 2002. The introduction of the Euro presents a milestone on the way towards a united Europe in which the people, the public services and the assets have freedom of movement. The member states hoped to gain from the Monetary Union two kind of chances: On one hand it is supposed to present the motor for further political integration in Europe and on the other hand – in addition to the Single Market – it was expected to launch higher

The euro area, which will hereafter be referred to as the Eurozone, remains in a state of

Since its introduction, the Euro has averaged $1.208 against the U.S. dollar. When the Euro was first implemented, it took approximately three years before the Euro’s exchange rate was above the U.S. dollar. In 2008, during the U.S. financial crisis, the dollar depreciated and the Euro’s value increased to approximately $1.47. When the EU started to experience their own debt crisis, the Euro began to fall to around $1.32. In recent years, the EU has been challenged on multiple levels. Some of which include Brexit and terrorism. This has caused the Euro to decline to around $1.10 against the U.S. dollar.

The introduction of the euro will have important implications not only for the Union and its Member States but also for their partners. But while it will be a major event for international monetary relations and the international monetary system, there will be no abrupt change; nor is it likely to be destabilizing.

The euro has been in existence for years, and is the official currency used by 18 of the 28 EU member states and regions outside the EU. After the US dollar, the euro is the most traded currency. When the EMU was formed the euro was able to be exchanged and lock in exchange rates against other currencies. According to BBC News, “the first plan for a single currency was drawn up in 1991. The members of the EU meet in Maastricht and agreed to set up a single currency, which partly aimed the drive towards the Economic and Monetary Union.” (2001). The 18 countries that are in the Eurozone include Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. The other countries do not participate in using the euro either because they do not want to use it as their currency or they do not

The Euro is the common currency of the European Monetary Union (EMU). The national currencies of the participating countries were replaced with Euro coins and bills on January 1, 2002. The countries that participate in the Euro Monetary Union (EMU) are Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal, and Finland (http://europa.eu.int/eoro/entry.html). These countries irrevocably established the conversion rates between their respective national currencies and the euro and created a monetary union with a single currency, giving birth to the euro. Euro banknotes and coins entered circulation on 1st January 2002.