How The European Monetary System Works

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

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

First with western Europe, and after the collapse of the Soviet Union, with the east as well. Many of these attempts were successful. One of the first of these attempts was the Marshall Plan which was used as an instrument to restore the economies of western Europe and to establish democracies. The plan would provide economic aid to fight the post war affects of poverty and in return expected cooperation for mutual benefit. The plan strengthened western Europe not as allies with each other and not against anyone. Another internal cooperation efforts was the formation of the European Economic Community(or Common Market) in 1957. The six original members were very successful and managed to eliminate all tariffs within their countries. After seeing this success, other nations applied for membership and EEC became what is presently know as the European Union. The European Union has been very successful in its endeavors to mutually help the member economies. One of these successful endeavours was the implementation of a common currency. As of 2002, seventeen countries now share the euro as their currency. This unifies where language and culture are barriers but money is not. Another major success in unification was the addition of ten members of the European union in 2004. Most of these additions were former Soviet bloc countries who had just a little over a decade free from Soviet influence. While this was a

The Eurozone is the economic region formed by those member countries of the European Union that have adopted the euro. (Perry, S. 1994).

Initially envisioned as a confederation of member states collaborating together for mutual benefit, the EU and its 27 member nations established a single integrated market with the goal of facilitating trade and international commerce. With the introduction of the Euro across the Eurozone, this monetary system has proven to be unsustainable given the region's traditional reliance on entitlement programs and social assistance. With federal budgets stretched to their limit, "the debt crisis has already spread through Greece, Ireland and Portugal, all of which have

When the Eurozone was founded on January 1, 1999, it was with the intention of further integrating and strengthening the nations of Europe, both economically and politically. Until recently, it was believed that the euro provided a stable currency with low inflation and low interest rates and encouraged sound public finance. That the use of a single currency increases price transparency, eliminates currency exchange costs, oils the wheels of the European economy, facilitates international trade, and gives the European Union a more powerful voice in the world. That the size and strength Eurozone would better protect it from external economic shocks, and provide the EU’s citizens a tangible symbol of their European identity, of which they can be increasingly proud as the euro area expands and multiplies these benefits for its existing and future members (European Commission).

In this report, we will take a closer look at Britain’s strategy to not adopt the euro currency, and the possibility of adopting the euro in the future. To do that, we must first make a better understanding of the benefit of using the single euro currency.

After the long awaited single currency implementation known as the euro, there have been many ups and downs to this monetary system. Many have been quick to criticize while others still praise its value claiming it will soon be valued strongly against the dollar. Our paper looks into the various aspects of the euro and the progress it has made since its initiation. We begin with a brief history of the euro then move on by raising some questions concerning the effects of the euro on various economic aspects such as competition and global financial institutions. We then provide insight to the various strengths and weaknesses of the euro and the implications this currency has on various institutions such as banks.

When the Eurozone was founded on January 1, 1999, it was with the intention of further integrating and strengthening the nations of Europe, both economically and politically. Until recently, it was believed that the euro provided a stable currency with low inflation and low interest rates and encouraged sound public finance. That the use of a single currency increases price transparency, eliminates currency exchange costs, oils the wheels of the European economy, facilitates international trade, and gives the European Union a more powerful voice in the world. That the size and strength Eurozone would better protect it from external economic shocks, and provide the EU’s citizens a tangible symbol of their European identity, of which they can be increasingly proud as the euro area expands and multiplies these benefits for its existing and future members (European Commission).

Europe's challenges with the Euro are complicated. The United States congress had trouble agreeing to enact legislature to raise its debt ceiling in order to meet its obligations and maintain its credit ratings. In Europe, separate countries need to agree to come together with a combined political will to stabilize countries and banks in financial trouble. Without the power to print money individually, each country under the single currency must come together under combined policies. Today, Europe seems willing to reach combined policy decisions to avoid an economic disaster. Ultimately, if this happens, the Euro will have a stronger future just as the United States gained a stronger political and financial system from policies created as a result of the Great Depression. If Europe fails to come to agreement on combined policies to solve the European Debt Crisis the world will realize the financial risks.

The European Union was born after the disastrous effects of two world wars with the idea to merge Europeans states into a single unity. Along with the purpose to bring economic and political partnership to bring peace and prosperity on the European continent. It now includes 28 European states as of this point. From this union, 17 members sought closer economic ties as well as monetary cohesiveness resulting in the formation of the Euro-Zone within the European Union. The Euro-Zone formed a single currency known as the euro that circulated among the 17 members. In addition, the citizens within the Euro-Zone may travel freely if they wish such as for going to work or simply on vacation without needing to be bogged down with passports or visas within the members of the Euro-Zone. Furthermore, this experiment has turned the Euro-Zone into an economic powerhouse for 60 years along with producing the world’s second highest GDP within the world economy; However, until recently this had not been the case. The Euro-Zone has a high probability of collapsing because of the debt crisis, the rise in nationalism, and finally Germany’s national interest that will lead ultimately to the Euro-Zones downfall.

The European Central Bank not only has the job of keeping prices stable, but also of ensuring that cross-border euro transfers are as cheap as possible for banks and their customers.

On 1st January 1999, 11 European Nations decided to abandon their own currencies and establish a common currency named “Euro”. (Klein, 1998). At that time, Greek was the only EU Countries that are not allowed to join the euro club even though they wanted due to failure comply with the convergence criteria. However, with the help of Goldman Sachs, Greek government managed to mast their true

The common currency is called “euro”. Euro is not used by all members; only 19 countries out of 28 are in the monetary union. A euro as currency was for a first time used in 2002.

To fully understand the context of the euro, an understanding of the creation of the European Union is crucial. It was in the aftermath of the most gruesome and destructive war that the world had ever seen that ideas of an integrated Europe started to take hold. Europe looked at itself and its staggering one trillion dollars of destruction it had created and vowed to put an end to these conflicts. Around this time, Winston Churchill, who was very adamant for an integrated Europe, called for the creation of a “United States of Europe.” He stated that if at first a state were not able or did not want to join,