It eases the mechanism of moving products, services, workforce and capital within the Europe. The basic aim of EU is to encourage and increase economic, social, political, trade, defense and security cooperation between the member countries.
The member countries of European Union consists of 27 independent states and these are, Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. European Union comprises of 18 % of the world's total trade (Europa 2009).
The first steps towards the EMU were only made in 1992, when the members of the EC met in Maastricht. A timetable for the development of the EMU was created there. In the years after the treaty the preparation began. Euro is an authorized currency of the 16 member countries of European Union. These states called Euro Zone includes, Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. UK refused to join the Exchange Rate mechanism because of the instability of the system. Euro was introduced to the world as a transactional currency of European countries on 1 January 1999 substituting the European Currency Unit (ECU). The currency was circulated all over European Union on 1st January 2002 (Bized 2009). Euro is used by 329 million of Europeans. According to the research conducted by IMF European Union is the second largest economy of the world. Euro is formally organized and managed by European Central Bank and the Central Banks of the EU countries. Euro is today world's most important currencies after the Dollar. Not all the EU members accepted Euro as a single currency for European Union. One of them is United Kingdom, but 90% of the international trade and transactions in UK takes place through Euro. Pound Sterling is used for local transactional purposes (Hilliard, B. 2008).
Economic advantages of European Single Currency
Elimination of the transaction Costs
A single currency all over the European Union do not require to exchange the money from one currency to another in different regions so the cost of changing money will be eliminated.
Elimination of Exchange rate risks
A single currency removes the risk of exchange rate.
Price Transparency & Equality
The law of one price minimizes the differences in price level. The different currencies cause difference in prices in the region due to the rate of the currencies. It causes inflation or may be deflation in the same geographical region.
Low level of Inflation
The transparency in price will lower the level of inflation as the same currency exchange rate does not require converting the price from one exchange rate to another.
Tourists can travel all over Europe without any restriction and problem of exchanging money or visa etc.
In the European Monetary Union the most important element is the constant growth rate and new jobs. There is balance in the trade among the member countries. It promotes price equality.
Facilitates International Trade
The Euro makes EU a strong