EURO : SINGLE CURRENCY PROS AND CONS

Euro is single currency applied by 17 members of European countries comprising by Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. They join together in euro area called euro zone.

Monetary policy handled by European Central Bank (ECB) purposed for keeping inflation under control. Fiscal policy remains in the hand of each country. Though, they implement the non binding agreement known as Stability and Growth pact.

In the initial establishment, euro constructed for offering good economic and political sense, travel easier, stable currency with low inflation and interest rate, encourage sounds of public finance. It’s also elevating price transparency, omitting currency exchange cost, facilitating international trade and positioning EU gain more voice in international stage through the openness trade with the world.

This currency has international financial scope for :

a.      International debt market

The third countries and also private corporations can issue bond (known as sovereign bonds if issued by foreign currency, or corporate bonds, issued by corporations) and regain payment with fixed interest future date.

b.      International loan and deposit market

c.        Foreign exchange rate

d.      International trade

e.       Reserves and anchor

The above statements are truly going not smoothly, after years survive from its first creation signed by Maastricht Treaty at 1992, now, bound to fail. Euro is not similar with single currency used by United States, dollars. There are some reasons of the dollars stability stance, allowing all of the U.S states operate this – labour mobility, wage flexibility, and central fiscal authority, none of this exist in Europe.

When some industries in north-eastern states closed, then the workers can move to the west, but, it can't be done in the quite different countries in Europe because of discrepancy of language, history, union membership and so on.

The euro zone governments have to oblige the stability pact and sometimes some of them are not prevalent to practise the criteria’s. One case that can describe this condition – When demand in Germany and France was quite weak early in the last decade, the ECB reduced interest rates sharply. That helped Germany and France but it also inflated real estate bubble in Spain and Ireland.

The other barriers are the different cycle of each countries and difference stage in their cycle, where each country facing different problems.

Using single currency can also cause the loss of national sovereignty because of cooperation between high performance of economic in some countries and the other weak economic countries performance.

Introducing new single currency also needs great cost for educating costumers, changing labels, training staff, changing computer software, and adjusting tills