What Is The Future Of 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?

The European Union (EU) is a unique economic and political partnership between 28 different countries. It consists of about half a billion citizens, and its combined economy represents about 20 percent of the world’s total economy (Briney, 2015). Today The European Union works as a single market, with free movement of people, goods and services from one country to another. There is a standard system of laws to be followed, and since 1999 many countries share a single currency called the Euro (Europa.eu, 2015). This essay will explore the background history of the European Union and the benefits and drawbacks of the European Union.

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.

Part of the exceptional nature of the EU stems from the notion that nothing like it has ever been attempted successfully before. The European Union is an international institution with a single market and shared currency. It strives to maintain singular goals and make its way towards being an “ever closer union”. Today, the European Union has expanded to include twenty-eight member countries with an influence that reaches every continent. This institution has had an impressive history, but it has reached a point of concern. The golden years which held high hopes of a united supranational Union are long over. The EU faces destructive problems today, which could ultimately end their impressive era of cooperation. The Union has come

The European Union is such a large politico-economic union that it plays a major role in the whole world’s economy. Although “the process of European Integration progressed over time both in depth and in extent” (Campos, et al., 2014, p. 6), it has been working on integration for over 30 years and the results are good at present as it is now providing benefits in GDP, labour markets, trading and many other aspects for its 28 member countries, including the United Kingdom.

     In the event of an integrated Europe, constructivists recognize that to completely avoid conflict, each state will have to succumb to a “European identity” and all individual identities will have to become merely “cultural gems” within the European system. This, they argue, can be achieved with the success of several steps including economic, judicial, and security integration . The first step has already been attempted with the establishment of the Euro, the common European currency, which has been outperformed by its monetary competitors. A great amount of trust will have to be secured between states before a common court or army can be established, and most likely with as little success as the common currency. So, even by these simplified guidelines the outlook for the creation of a new “European

Despite the negative outcomes of a Eurozone breakup, it is worth to note that it may be the best solution to the current debt crisis. At the moment, the crisis has reached the stage where it may no longer be both financially and politically feasible to keep the whole Eurozone together. A prime example is Greece. Financially, the Eurozone may be better off letting Greece go, as efforts to reduce its national debt by offering exorbitant bailouts have been a huge drain on funds. Political wise, the Greek public has rejected the austerity measures imposed as a condition for the bailouts and have even voted for political parties which rejected austerity. Thus the funds used to bail out Greece can be better used on larger, more integral Eurozone countries which are more determined to reduce their debt levels.

Today, the global economic crisis is centered around the struggles of the European Union to protect its very existence. At the start of its second decade of existence, the common currency form of the Euro, shared by 17 of the European Union's 27 member states, is imperiled by the threat that some of its struggling member might depart from the Eurozone. With a particular focus on Greece, which balanced the question of its status in the Eurozone over the course of its recent elections, the discussion here considers the possible consequences of a breakup of the Eurozone. By and large, the discussion will demonstrate that the consequences would be catastrophic for the global community as a whole.

1. On January 4, 1999, eleven member states of the European Union initiated the European Monetary Union (EMU) and established a single currency, the euro, which replaced

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).

Once in a lifetime a family might make one large purchase or transaction across a European border such as buying a holiday home or a piece of furniture. A single currency would help that transaction pass smoothly. Likewise, “businesses would no longer have to pay hedging costs which they do today in order to insure themselves against the threat of currency fluctuations. Businesses, involved in commercial transactions in different member states, would no longer have to face administrative costs of accounting for the changes of currencies, plus the time involved. It is estimated that the currency cost of exports to small companies is 10 times the cost to the multi-nationals, who offset sales against purchases and can command the best rates”[1]. A single currency in the EU should overall result in lower interest rates as all member European states would be locking into German monetary credibility. The stability pact (the main points of which were agreed at the Dublin summit of European heads of state or government in December 1996) will force EU countries into a system of fiscal responsibility which will enhance the Euro's international credibility. This should lead to more investment, more jobs and lower mortgages.

The Eurozone is the worlds most sophisticated currency Union and has since its foundation helped to spur the economic Development of European Countries. This essay will firstly address the question to which extend Germany has benefitted from its membership since it joined. Furthermore, the currency union will be critically examined to figure out in what way it does fulfil the requirements of an Optimum currency area. Finally, policy lessons learned from Germany in the OCA will be set out.

“The problem is that the European capitalists are attempting to move towards union at a time when the general economic conditions are pointing in the opposite direction. If they could obtain a rate of growth of 5 or 6 percent, as they did during the period of upswing, then they could bring about monetary union without too much trouble. But with growth rates of 3-2 percent or less this impossible. All this means that a Federal European

“If the Euro fails, then not only the currency fails… Europe will fail, and, with it, the idea of European unity.” Merkel’s words preclude the diminishing consensus within European Union, no matter the attempts to solidify support within Europe. The 2008 Eurozone crisis has lead to distrust and unease in Europe. The Treaty of Lisbon (2009) was the re-organisation of the European Union policy-making structure after the pillar formation of the Treaty of Maastricht (1993). The Treaty of Lisbon, no matter how triumphantly proclaimed to the people, has given increasing control to the European Parliament and other intergovernmental bodies, and less in the hands of the states or the people. This, coupled with dissatisfaction of the EU and an