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A History Of The Euro Essay

2364 words - 10 pages

The EU and its single currency system referred to as the euro, is known today as one of the world’s most important currencies and is considered to be one of Europe’s most paramount achievements. The euro was launched January 1st 1999 automatically becoming the currency of more than 300 million people. From 1999 to 2002, the euro was classified as an invisible currency; merely utilized for electronic payments as well as accounting purposes. Euro notes were not habituated until January 1st 2002 when it supplanted fixed conversion rates along with the banknotes and coins of other national currencies such as the Belgian franc. The euro is now utilized by seventeen Member States of the European Union. The single currency presented irrefutable benefits for the region because it made traveling throughout Europe easier, empowered Europe on a global scale and lowered the costs of financial transactions. Prior to the euro, Europe had an established monetary system that was customarily put into place in March 1979 after the collapse of the Bretton Woods system. The European Monetary System (EMS), based a lot of concepts on fixed and adjustable exchange rates. The currencies of all the Member States, except the United Kingdom, participated in the exchange-rate mechanism (Padoa-Schioppa, Tommaso). The comprehensive and fundamental law of the (EMS) was to institute exchange rates based on central rates against the European Currency Unit, which was a weighted average of the participating currencies. Eventually over time, the EMS made strides in reducing exchange-rate variability. The economic convergence brought forth by the variability of those exchanges-rates allowed for astute currency stability within the region. Unfortunately, economic stability wasn’t enough to lift their economy over the edge catapulting Europe in the realm of economic superpower; eventually forcing Europe to prorogate the system entirely. Implementing a single currency system seemed more ideal for Europe as it became gradually distinctive that the potential of the internal market could not be fully subjugated as long as relatively high transaction costs correlated directly with currency conversion (Padoa-Schioppa, Tommaso). Ultimately, the goal of the euro was to create what some would call the impossible triangle, which entailed exchange-rate stability, free flowing movement of capital, and self-governing monetary policies unharmonious in the long term. The Key to understanding the impact of the European financial crisis, we first had to develop an understanding of the history of their financial systems as well as an acute knowledge of its workings. In this paper, we will examine the country of Finland and its handling of the financial crises considering it was a member of the common currency; as well as compare and contrast their experiences with that of the United Kingdom.
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