The Euro is fundamentally a tool to enhance political
solidarity. This political motivation began when the idea of the European Union
and a single currency was first conceived. While it also has the economic
effect of unifying the economies of participating countries, it ultimately does
much more for the European Union.
Economically, the euro's advantages include:
Elimination of exchange-rate fluctuations - Any time either a consumer or a business made a commitment to buy something in a different country in the future; they stood the chance of paying much more or less than they had planned. The euro eliminates the fluctuations of currency values across certain borders.
Price transparency - Being able to easily tell if a price in one country is better than the price in another is also a big benefit, both for consumers and businesses. With price equalisation across borders, businesses have to be more competitive. Pricing still varies, but consumers can identify a good deal with more ease.
Increased trade across borders - The price transparency and elimination of exchange-rate fluctuations contribute to an increase in trade across borders of all the European countries.
Increased cross-border employment - Not only can business be conducted across borders more easily, but people are more easily employable across borders. With a single currency, it is less hassle for people to cross into the next country to work, because their salary is paid in the same currency they use in their own country.
Expanding markets for business - Business can expand more easily into the other countries. Rather than having to set up separate accounting systems, banks, etc. for transactions in countries other than their native one, the euro makes it simple to operate from a single central accounting office and use a single bank.
Macroeconomic stability - Because of the European Central Bank, introduction of the euro also helps to lower and control inflation in the EU countries.
Lower interest rates - Because of the decreased exchange-rate risk, the euro encourages lower interest rates.
Economically, the euro's advantages include:
Elimination of exchange-rate fluctuations - Any time either a consumer or a business made a commitment to buy something in a different country in the future; they stood the chance of paying much more or less than they had planned. The euro eliminates the fluctuations of currency values across certain borders.
Price transparency - Being able to easily tell if a price in one country is better than the price in another is also a big benefit, both for consumers and businesses. With price equalisation across borders, businesses have to be more competitive. Pricing still varies, but consumers can identify a good deal with more ease.
Increased trade across borders - The price transparency and elimination of exchange-rate fluctuations contribute to an increase in trade across borders of all the European countries.
Increased cross-border employment - Not only can business be conducted across borders more easily, but people are more easily employable across borders. With a single currency, it is less hassle for people to cross into the next country to work, because their salary is paid in the same currency they use in their own country.
Expanding markets for business - Business can expand more easily into the other countries. Rather than having to set up separate accounting systems, banks, etc. for transactions in countries other than their native one, the euro makes it simple to operate from a single central accounting office and use a single bank.
Macroeconomic stability - Because of the European Central Bank, introduction of the euro also helps to lower and control inflation in the EU countries.
Lower interest rates - Because of the decreased exchange-rate risk, the euro encourages lower interest rates.
Structural reform for European economies - The participation requirements of the euro pushed many EU member states who wanted to join to make sure their economy is in order and improve their economic growth. With the requirements of the Stability and Growth Pact, they were also supposed to maintain that control in the future.
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