European Monetary Union Essay

2802 words - 11 pages

1 Why are the Europeans so intent on Economic Integra-tion?1.1 Economic IntegrationAlready while the Second World War 44 nations signed the contract of Bratton Woods, which should guarantee a stable currency system with fixed exchange rate. Later the "Werner Group", which was a group of experts and led by the Luxembour-gian Prime Minister Pierre Werner, had the idea of a European currency. However the idea was too early. First the contract of Bratton Woods had to get in trouble in order to make something going on.Since the collapse of Bratton Woods in 1971, the gap between normal states and economic powers grew always faster and faster. Soon the first countries crystallized from the rest, which would be the economic superpowers. Since none of the Euro-pean countries was big enough to keep up with economic powers like the United States in a long term view, unity between the different states of Europe became more and more important. If Europe wanted to show that it could be an independent global player, it had to bundle up its forces.In order not to get addicted of any other economic power, it primarily was important that the different states started to strengthen themselves by increasing their interstate trade, within the region of Europe. As a consequence Europe was able to appear as a strong and independent player on the world market. Moreover there was the idea to support the economic growth based on the element of division of labour. In the fore-ground there is the theory of comparative cost advantages of David Ricardo. Each country produces the products where it has the lowest costs and exchanges it with other products of other countries (Hammerschmidt, Kort,1999).If the different states are economically well integrated, customs between member states can be removed, and firms are able to enter new markets with competitive prices. So firms are in permanent competition, well prepared for the global market and not protected by the state. Moreover it makes it easier to join any cooperation, merger or acquisition. Parts for products can be produced by that member state that can produce it by the lowest cost, and there is no risk of customs by the import.1.2 Economic Integration on Monetary UnionThe most effective step in direction of a strong Europe was the introduction of the Euro. With this unitary currency, which completely replaced the old ones, a lot of money could be saved and used for new businesses. In former days, there were re-peating national currency crisis, which resulted from different monetary policies. With the introduction of the Euro, these problems disappeared with one hit - a circum-stance that enormously increased monetary mobility. It became easy to spend money all over Europe.Furthermore there has been a significant reduction in transaction costs and price transparency. On the one hand, a fact that makes it cheaper to buy products abroad, on the other hand, a circumstance that makes prices more comparable for everyone....

Find Another Essay On European Monetary Union

European Monetary Union and United Kingdom

1120 words - 4 pages On January 1, 1999, eleven (Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxumbourg, the Netherlands, Portugal, and Spain) out of the fifteen European countries that make up the European Union(EU) formed the Economic and Monetary Union(EMU) and began using a common currency, the euro. Greece joined as of January 1, 2001. The remaining three countries, Denmark, Sweden, and the United Kingdom have yet to join the EMU either because

The Impact of European Monetary Union

2107 words - 8 pages I. Introduction According to Lane (2006), the European Monetary Union (EMU) began on the year 1999. Following his line of analysis and reasoning, this paper shall seek to analyze the purported impacts of the said action in the light of their inflation rates and the proportion of their portfolio holdings allocated to the other members of the Euro-zone. Furthermore, the author of this paper shall look qualitatively in the current Asian context to

Is the European Monetary Union a disaster? ? Discuss

3423 words - 14 pages EMU in the Maastricht Treaty that ought to be reformed. It takes the viewpoint that although since the introduction of the Euro there is an apparent recession in the Euro area countries, it is not entirely to be blamed on new currency and that the allegation that the EMU is a disaster is totally unfounded. For over thirty years now a European Monetary Union has belonged to the articulated aims of the European Union. All previous attempt to

The European Monetary Union (EMU) - The Euro as a Single Currency

1720 words - 7 pages The European Monetary Union (EMU) - The Euro as a Single Currency Liberalizing trade is nothing new to the world, but we have never witnessed such a vast economic integration between sovereign countries like the integration carried out in the European Union. Customs duties between European countries started to come down steadily in the early 1950s and were abolished in 1968 with the introduction of a customs union and the implementation of the

The Pros and Cons of EMU - European Monetary Union. A concise summary (3000 words) of the main pros and cons of EMU and the Euro - covering economics, social issues, national soviergnty, etc.

3421 words - 14 pages advent of the Breton Woods system in the USA promised increased stability through the use of a controlled mechanism of exchange rates. And, by 1969, the EU was beginning to target full monetary union, and this was the centre of debate at the Hague Summit. Progress was very slow however, and it wasn't until 1979 that Chancellor Schmidt of Germany, despite the advice of his own central bank, decided to implement the European Monetary System (EMS

Synopsis of Chapter Nine

2185 words - 9 pages and Monetary Union. The author does not use a lot of technical terms and if she does they are explained which makes this book perfect as a study-book for students who want to enter this debate and want to be able to carefully structure their arguments. The authors’ main argument is question if the European Economic and Monetary Union is an optimal currency area. Robert A. Mundell is usually seen as the theorist behind the Optimum Currency Area

The Euro Versus the Dollar

1322 words - 5 pages trying to prevent another European war. The Single European Act amended the European Committee’s treaties to strengthen them into a single internal market. The Treaty of the European Union, also known as the Maastricht Treaty, provided a central banking system. The treaty also provided a common currency to replace the national currencies, legal definition of the EU and framework for the political role. In 1979 the European Monetary System was

Will the Euro Survive?

1495 words - 6 pages publication “Economic and monetary union and the euro” by the European Commission as the main source and other credible sources about the euro in my paper. Since the start of the European Coal and Steel Community with the Treaty of Paris in 1950s, the leaders of the European Community have higher ambition to create the new “common currency”. Politicians rather than economists pushed for it, and the idea is that to maintain the economic

The European Union, its development, the steps taken in the development, the economic details regarding the Union and Future prospects of the union

3167 words - 13 pages than individual action. This is more effective in the single market, monetary policy, economic and social cohesion (coming together), foreign and security policy, employment policy, environmental protection, foreign and defence policy, and in the creation of an area of freedom and justice.During the creation of the European Union, important treaties were created and signed by the members which gradually unified them more and more. In that period

Is Europe an Optimum Currency Area?

2265 words - 9 pages adjustment even the exchange rates are fixed.The theory of optimum currency areas is important for analyzing European monetary unification. OCA theory that focus on asymmetric shocks, labor mobility and the transactions value of a single currency subsumes some relevant considerations on the decision of whether to fix the exchange rate or form a monetary union. It has some difficulties to move from theory to empirical work and policy analysis. OCA

European Parilment along with European Union

4142 words - 17 pages Community until Jan. 1, 1994.StatusThe European Union is the most powerful regional organisation in existence. In certain areas, where Member States have transferred national sovereignty rights to the Union (e.g. currency, monetary policy, the internal market, foreign trade), the EU begins to resemble a federal state. However, the Union is not organised federally but according to the subsidiarity principle (a term expressly created to describe

Similar Essays

The European Monetary Union Essay

602 words - 2 pages The European Monetary Union The European Monetary Union (EMU) serves as an economic necessity, a complement to the European single market, which is the free movement of people, goods, services, and capital within the European Union (EU). The Euro, a single currency created under ideals of the Maastricht Treaty, will strengthen European unity and constitute as a factor for stability, peace, and prosperity for all member states as well as

Sustaining The European Monetary Union Essay

2806 words - 12 pages , and Spain. Many of these countries have become dependent on financial assistance after adopting the Euro, leading to the popular belief that the European monetary union (EMU) is destined to fail.2 Furthermore, debt and illiquidity have crippled the Eurozone with no relief in sight. Despite these problems, the European monetary union can be conserved and improved to maintain stability and establish an evolving model for countries around the world

European Economic And Monetary Union Essay

3924 words - 16 pages European Economic and Monetary Union The Economic and Monetary Union (EMU) is a single currency area within the European Union in which people, goods, services and capital move without restriction (Europa Quest (1), 2001). Imperative to the success of the EMU is the implementation of a single European currency, the Euro, and the application of specific macro-economic policies by the EMU member states (Harris, 1999: 78). Moreover, it is the

The History Of The European Monetary Union

3624 words - 14 pages )1. The development of the European Monetary UnionIn 1998 the European Exchange Rate Mechanism (ERM) was introduced as part of the EMS in order to reduce exchange rate variability and to achieve monetary stability in Europe in preparation for the European Monetary Union and for the introduction of the Euro. In 1999 ERM II replaced ERM. ERM II is an exchange rate mechanism for EU countries which are currently not taking part in the monetary union