How And Why Europe Created A Single Currency Essay

Type of paper: Essay

Topic: Europe, European Union, Money, Currency, Economics, Euro, Stability, World

Pages: 3

Words: 825

Published: 2021/03/01

After the shocking wars that swept across the world in the first half of the 20th century, Europe saw economic and security benefits in creating an economic union of European states to ensure growth and stability. However, to bring these ambitious goals to fruition, the organization needed a common currency. With foundations laid as far back as 1957 with the Treaty of Rome, the currency had not become fully-fledged until the early 2000s although it gained an official status in 1992. Ever since, it has befitted member states and the global economy. The latter along with euro zone businesses no longer needs to fear about exchange rate fluctuations and exchange costs, which stimulates trade and investment. Ordinary people get better and higher-paid jobs in a sufficient quantity and enjoy stable prices. Thus, the creation of a single currency that spanned five decades presents benefits to both euro zone businesses and citizens and the global economy.
Europa (n.pag.) informs that the euro is the currency of 17 member states of the EU, with other members being close to adopting the single currency. National Bank of Belgium (n.pag.) states that the first step was the signing of the Treaty of Rome in 1957 that set the goal of launching a common market to increase unity among member states and bring wealth. The European Community made its considerations of a monetary union known in the Werner Report of 1970. The project of a single European currency emerged in 1985, and its supplementation by a single currency was only a matter of time. The Delors Report on Economic and Monetary Union released in 1989 put forward a three-stage plan resulting in the establishment of a European central bank and a single currency. The Maastricht Treaty put into force in 1992 transformed the European Community into the Monetary and Economic Union.
The Madrid European Summit in 1995 saw formal undertakings provided by 15 member countries give in support of a single currency adopted. The adaptation of the Stability and Growth Pact of 1997 at the Amsterdam European Council set limitations with regard to public finance for countries joining the euro. The year 1999 marks the initiation of the Stage 3 of Economic and Monetary Union that binds participating currencies to have a fixed exchange rate. Euro zone states enforce a single monetary policy. The Euro receives the status of a legal tender. The euro had existed in the shape of cashless payment, such as cheques, bankcards, and transfers until 2001. The EU introduces the euro coins and banknotes, which corresponded with the withdrawal of the Belgian franc. Another 10 states entered the EU in 2004 adopting the euro (National Bank of Belgium n.pag.).
European Commission (n.pag.) suggests that the rationale behind the creation of a single currency is that it has a lot to offer in terms of benefits, as opposed to separate currencies each European country used to have. The strengthening of a single market, the liquidation of exchange costs and fluctuation risks, a closer cooperation among member countries for a stable economy and currency are equally beneficial to all. At a time when the founding states established the EU in 1957, they focused on the launching of a common market, which required a closer monetary and economic cooperation, upon which internal market growth and development, prosperity, job generation, and economic performance depended. Be they businesses or separate individuals, all enjoy the benefits of a single currency that provided more opportunities and a greater security for markets and business ventures, gave price stability and more choices for citizens and consumers, rendered financial markets integrated, and improved economic growth and stability. The currency also created a lucid sign of a European identity and allowed a better presence for the EU in the global economy. Europa (n.pag.) summarizes that the single currency is facilitating travelling, reducing the costs of fiscal transactions, and making the role of Europe on the international arena even more central.
Economic stability makes it possible for local government to make long-term plans. Businesses also stand to gain since economic stability decreases uncertainty and makes owners willing to invest, which advantages ordinary people who can receive higher-salaried jobs and a higher number of employment opportunities. The efficiency of a single market increases since euro as a single currency brings opportunities and strength that stem from the scale of the Eurozone economy and integration. Prior to euro, the need of exchanging currencies implied additional risks, costs, and the lack of transparency in cross-border transactions. Single currency-induced price comparability along with zero fluctuating rates of exchange stimulates cross-border investment and trade. The global economy itself benefits by euro, which is a good reserve currency to third world states that can do business in the appealing euro zone, which is a positive signs for investment and trade. Scale and careful management ensure economic stability to the euro area increasing its resilience to the usually disruptive economic shocks (European Commission n.pag.). A single currency strengthens and improves cooperation between EU members, which reduces the likelihood of separation, and a strong Europe is a prerequisite for regional stability. Had the EU existed in the first half of the 20th century, the humanity could have avoided both world wars with all economic losses that they imply.
Overall, the creation of a single currency that took five decades was a calculated move. The reasons for the EU to create euro are stability, growth, and security advantages it implies. People enjoy affordable goods and have access to higher-salaried jobs that are in abundance. Europe has received a sign of its own unique identity. Financial markets have become integrated. The single currency has eliminated exchange costs and fluctuation risks and related fears that had kept foreign investors and commercial ventures from doing business in Europe before. The EU has achieved a better presence in the global economy. More importantly, the single currency has made economic ties and the concept of a common economic zone profitable, which reduces the possibility of disintegration and ensures security Europe did not have on the eve of both world wars.

Works Cited

Europa. “Towards a Single Currency: a Brief History of EMU.” Europa. Summaries of EU Legislation. 19 July 2011. n.pag. Web. 17 Apr. 2015.
European Commission. “Why the Euro?” 27 March 2014. n.pag. Web. 17 Apr. 2015.
National Bank of Belgium. “A Brief History of Euro.” NBB. 2015. n.pag. Web. 17 Apr. 2015.

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How And Why Europe Created A Single Currency Essay. Free Essay Examples - Published Mar 01, 2021. Accessed August 11, 2022.

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