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The Future Of The Euro Essay

2557 words - 10 pages

The Future of the EuroThe European Union is the current talk in the world news and for great reason. Many of the nations that make up the union face large deficits and massive debts, while Italy and Greece owe more than they earn. If this situation is not handled correctly this crisis will not only affect the rest of Europe, but will potentially make its way to into the U.S. market. With Europe undergoing an economic depression, their monetary unit, the Euro, once one of the strongest currencies in the world could become obsolete to the global economy.The Euro was brought to life on February 7th, 1992 when the Treaty of the European Union, also known as Treaty of Maastricht was signed (Maastricht). The treaty brought together eleven of the countries that make up the current Union and introduced a new monetary unit, the euro. The 1st of January 2002 saw the Euro coins and notes become official legal tender not only in the 12 initial EU-member Eurozone countries, but also in a number of smaller nations, dependencies and regions (Maastricht). The euro was created under the belief that a common currency would enhance European solidarity and aid in achieving peace and prosperity in the region. Additionally, given that the majority of EU member nations' international trade is with other EU members, having a single currency eliminated exchange rate risks from internal markets, which cut the costs of transactions and facilitated businesses in trading across national borders. Trading and investment was thus expected to increase, leading to jobs and economic growth (Maastrich). With the euro taking the place of the currencies used by the countries in the European Union and forming one unit, it allows for higher trading in the world market.Imagine that the dollar and the euro are two banks, and you are deciding in which bank to put your savings. Jeff Faux of the Economic Policy Institute, describes this by saying, "One bank the euro is making a profit and is a net creditor, where more money is owed to it than it owes. The other bank the dollar, has been running a loss for 20 years, owes a net of $1.5 trillion to the rest of the world" (Faux). I think you know where you would put your money. Since 1999, the euro has surpassed the U.S. dollar to a ratio of 1.3, with a higher value than the dollar. Many more investors are purchasing stocks and bonds in Europe rather than in America, which only increases the euro's strength in the long run.Right now Europe is headed towards a recession and ultimately a depression. According to CNN "Fourteen out of 27 countries in the European Union had public debt exceeding 60% of their gross domestic product at the end of 2010, according to official statistics" (Debt). Essentially, these countries owe more money than they are earning. Greece has been the country that has suffered the most. Greece has been hit especially hard because its main industries, shipping and tourism are extremely sensitive to changes in a down economy....

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