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Introduction
Single Currency
Video
Three stages of EMU
Six Reasons for Implementation
Disadvantage
We are going to discuss in detail six
reasons for the implementation of Single
Currency. We will also discuss one
disadvantage of this implementation.
The single currency was created in 1999 when the exchange rates of the currencies of the participating countries were locked into the euro
The euro banknotes and coins were introduced in 2002 in 12 countries
http://www.youtube.com/watch?v=HoL
NdBq9f5M
Abolition of all restrictions on the
movement of all capital
Increased co-operation between central
banks
Free use of the ECU (European Currency
Unit, forerunner of the euro)
Improvement of economic
convergence
Establishment of the European Monetary Institute (EMI)
Ban on the granting of central bank credit
Increased co-ordination of monetary policies
Process leading to the independence of the national central banks, to be completed at the latest by the date of establishment of the European System of Central Banks
Irrevocable fixing of conversion rates,
Introduction of the euro
Conduct of the single monetary policy
by the European System of Central Banks
Entry into effect of the intra-EU exchange
rate mechanism
In January 2002 was the introduction of
the euro banknotes and coins
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 equalization across
borders, businesses have to be
more competitive
Pricing still varies, but consumers
can more easily spot a good
deal or a bad one
Increased trade across borders
The price transparency, elimination of
exchange-rate fluctuations, and the
elimination of exchange-transaction
costs, all contribute to an increase in
trade across borders of all the Euroland
countries.
Increased cross-border employment
Business can be conducted across borders more easily
People are more easily employable across borders
With single currency it is less frowned upon 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
Joining a fixed exchange rate may cause inflationary expectations to be lower
Often countries join a semi-fixed exchange rate, where the currency can fluctuate within a small target level, however the ECB has control over it
The euro has eliminated the damaging effects of intra-European exchange-rate tensions, which accompanied external shocks in the past and were often costly in terms of growth and employment.
The European Central Bank (ECB),
introduction of the euro also helps to lower
(and control) inflation among the EU
countries:
Low interest rates
Low inflation regime encouraging higher and better quality investment
Prudent government spending & low government borrowing
Business can expand more easily into
neighbouring countries. Rather than
having to set up separate accounting
systems and banks
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
The participation requirements of the
euro pushed many EU member states
who wanted to participate to get their
economies in shape and improve their
economic growth
With the requirements of the Stability
and Growth Pact, they will also have to
maintain that control in the future, or
face fines
There is no clear budgetary and Fiscal
Policy in the Eurozone, despite a unified
monetary policy.
As a member of the Eurozone, the Irish
government has to comply with strict EU
rules concerning government spending
and taxation
USA and UK
As the USA and the UK are not in
Eurozone it makes trading uncompetitive
The euro increases in value against the
dollar and pound sterling this makes Irish
exports to the UK and USA more
expensive
In conclusion the six implementations of
a single currency such as the euro helps
increase trade across boarders, expands
markets for business and helps lower the
interest rates within the EU countries.
Improves employment across boarders
as the currency has the same value in all
countries
http://ec.europa.eu/economy_finance/publications/publication7309_en.pdf
http://www.youtube.com/watch?v=HoLNdBq9f5M
http://www.oxforddictionaries.com/definition/english/single-currency
http://www.ecb.europa.eu/ecb/history/emu/html/index.en.html
https://www.ecb.europa.eu/ecb/educational/facts/euint/html/ei_004.en.html
http://europa.eu/legislation_summaries/economic_and_monetary_affairs/introducing_euro_practical_aspects/l25007_en.htm