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Business Economics Bachelor - Essay Example

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Business Economics Bachelor

The greatest advantage of the Euro is that there is regional currency stability due to the fixed exchange rates. The Euro has led to price stability within the EU characterized by low inflationary trends and stable public finances. This has increased the credibility of the Euro due to large currency zone thus stability against the speculation. This credibility is reinforced by a common monetary policy that is governed by the European Central Bank. Currency stability has encouraged trade as there is a reduction in both external and internal currency instability. The single currency eliminated the risks involved in exchange rates making importers and exporters better placed to make accurate growth projections in foreign markets. Businesses no longer pay hedging costs as an insurance against currency fluctuations. They are also spared against the costs incurred as a result of accounting across currencies.
Small businesses are the greatest beneficiaries as they would otherwise incur greater costs as a result of currency fluctuation, unlike large multinationals that enjoy the benefits of economies of scale. This has encouraged entrepreneurs and Small and Medium Enterprises (SMEs) operators' to trade beyond geographical boundaries and expand their businesses (BBC News, 1998). The single currency has encouraged tourism as people are spared the task of currency exchange thus red tape procedures are eliminated. This means that tourists are not at risk because of carrying huge sums of money and do not encounter extra charges because of commissions (BBC News, 1998). It has enabled individuals to trade beyond their geographical locations and compare prices. The internet has made this even better as one can easily shop for the best offer on a product or service. Even traders who are not involved in international trade have benefited substantially as sub-contractors have engaged importing goods thus forcing a series of price reductions. The Euro has been instrumental in oiling the European economy's gears as it has opened up doors to free trade and reduced the unemployment rates. This has seen the Euro zone protection against external economic turbulence such as the increasing world oil price.

The Euro has encouraged political integration as a result of the creation of an economic state. It has resulted in the formation of a community that is founded on economic grounds and this has ensured that any political drawbacks are quickly forgotten. It has been deemed as virtuous that economic powers have concentrated their economic and monetary resources.

Finally, the Euro has given the EU a powerful presence and common voice in the global fora and in international organizations such as the World Bank, International Monetary Fund and such structured organization. The citizens of the EU Member States have been provided them with a visible symbol of their identity.

However, the Euro has several critics. Firstly, the Euro has disabled the ability of EU Member States to devalue its national currency or adjust prevailing interest rates in response to favorable economic adjustments as this policy is under the sole govern of the European central Bank. Europe is a diverse in terms of its productivity rate, ...Show more

Summary

The Euro was introduced in 1999 with the aim of integrating European nations. Its use was implemented in two phases; first, as a virtual currency to assist in accounting and in payments that did not involve hard cash. The second phase was implemented in 2002, with the Euro appearing as coins and banknotes (EU, 2008).
Author : jaron79
Business Economics Bachelor Essay essay example
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