Will The Euro Survive? Essay

1495 words - 6 pages

"Europe must prevent Greece from becoming an out-and-out catastrophe and make sure that the same fiscal 'remedy' is not applied to other weak economies" -- Franziska Brantner

The brutality of the World War II and the anguish of the Cold War enforced nations in Europe to establish the European Union for peace and unity in the region. With ratification of the Maastricht Treaty by members of the European Community in 1993, an economic and political union; the European Union is formed. In December 2012, the European Union awarded the Nobel Peace Prize for its “historical accomplishments”. Nevertheless, the member states of the European Union are still facing the crisis that started in the Eurozone since 2009. One of the major causes of the crisis is the common currency – the euro which has weak structural formation. The creation of a currency, the euro, is one of the major parts of the European Union. The German Chancellor Gerhard SchrÖder said in a speech in 1999 that “The introduction of the euro is probably the most important integrating step since the beginning of the unification process.”(Yeager, 30) Therefore, in this essay I would like to study the history of creation of the euro, lessons that the European Union draws from the euro crisis and analyze the future predictions of specialists about the euro. I will use the 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 stability in the region as well as a symbol of European unity.(Yeager, 30) Lastly with the Maastricht Treaty signed in 1992, the European Union leaders reached agreement on economic and monetary union (EMU), and agreed to create a single currency. The European Central Bank had established in the late 20th century. The European Central Bank (ECB) is the central bank for the euro and independently implements monetary policy for the euro area. (European Commission, 5)The Treaty on the Functioning of the European Union (2008: Art. 127) gave the European Central Bank a single mandate "to maintain price stability." (Schwartz, 522) The euro has been started circulating as new currency since 2002 and has become the second most important international currency after the US dollar. In principle, all the EU countries are part of the economic and monetary union although not all use the euro. There are two main reasons for the member states that not to adopt the euro. First is the member state decided to ‘opt-out’ which means that the country was not required to participate in the third stage of EMU of adopting the euro. For example, Denmark and United Kingdom chose to ‘opt-out’ from introducing the...

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