How The European Monetary System Works

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Introduction It is important to understand how the European Monetary System works, because the world is becoming highly globalized. Not only are businesses using trade, but consumers are dabbling into the consideration of buying products straight from other countries. Knowing how Europe’s currency, political and economic system works can help other countries better participate in trade. But because of the size of the European Union, it has become a difficult task to bring all those European nations to operate in unison. Europe is made up of more than 30 countries that have even more varieties of different cultures. Bringing these different cultures and systems together has been a long process over time that is continuing to develop.…show more content…
It should also bring greater sized benefits, healthiness, and internal efficiency to the EU economy as a whole and to the markets of the individual member states. This integration of all nations in Europe was to be done by implementing the Economic and Monetary Union (EMU). EMU consist of bringing all 28 members of the EU to compliance with following the same monetary system. According to the European Commission, “EMU involves the coordination of economic and fiscal policies, a common monetary policy, and a common currency; the euro.” (European Commission, 2014).
The Euro 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
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