Introduction

Single Currency

Video

Three stages of EMU

Six Reasons for Implementation

Disadvantage

We are going to discuss in detail six

reasons for the implementation of Single

Currency. We will also discuss one

disadvantage of this implementation.

The single currency was created in 1999 when the exchange rates of the currencies of the participating countries were locked into the euro

The euro banknotes and coins were introduced in 2002 in 12 countries

http://www.youtube.com/watch?v=HoL

NdBq9f5M

Abolition of all restrictions on the

movement of all capital

Increased co-operation between central

banks

Free use of the ECU (European Currency

Unit, forerunner of the euro)

Improvement of economic

convergence

Establishment of the European Monetary Institute (EMI)

Ban on the granting of central bank credit

Increased co-ordination of monetary policies

Process leading to the independence of the national central banks, to be completed at the latest by the date of establishment of the European System of Central Banks

Irrevocable fixing of conversion rates,

Introduction of the euro

Conduct of the single monetary policy

by the European System of Central Banks

Entry into effect of the intra-EU exchange

rate mechanism

In January 2002 was the introduction of

the euro banknotes and coins

Being able to easily tell if a price

in one country is better than the

price in another is also a big

benefit both for consumers and

businesses

With price equalization across

borders, businesses have to be

more competitive

Pricing still varies, but consumers

can more easily spot a good

deal or a bad one

Increased trade across borders

The price transparency, elimination of

exchange-rate fluctuations, and the

elimination of exchange-transaction

costs, all contribute to an increase in

trade across borders of all the Euroland

countries.

Increased cross-border employment

Business can be conducted across borders more easily

People are more easily employable across borders

With single currency it is less frowned upon for people to cross into the next country to work, because their salary is paid in the same currency they use in their own country

Joining a fixed exchange rate may cause inflationary expectations to be lower

Often countries join a semi-fixed exchange rate, where the currency can fluctuate within a small target level, however the ECB has control over it

The euro has eliminated the damaging effects of intra-European exchange-rate tensions, which accompanied external shocks in the past and were often costly in terms of growth and employment.

The European Central Bank (ECB),

introduction of the euro also helps to lower

(and control) inflation among the EU

countries:

Low interest rates

Low inflation regime encouraging higher and better quality investment

Prudent government spending & low government borrowing

Business can expand more easily into

neighbouring countries. Rather than

having to set up separate accounting

systems and banks

Transactions in countries other than their

native one, the euro makes it simple to

operate from a single central

accounting office and use a single bank

The participation requirements of the

euro pushed many EU member states

who wanted to participate to get their

economies in shape and improve their

economic growth

With the requirements of the Stability

and Growth Pact, they will also have to

maintain that control in the future, or

face fines

There is no clear budgetary and Fiscal

Policy in the Eurozone, despite a unified

monetary policy.

As a member of the Eurozone, the Irish

government has to comply with strict EU

rules concerning government spending

and taxation

USA and UK

As the USA and the UK are not in

Eurozone it makes trading uncompetitive

The euro increases in value against the

dollar and pound sterling this makes Irish

exports to the UK and USA more

expensive

In conclusion the six implementations of

a single currency such as the euro helps

increase trade across boarders, expands

markets for business and helps lower the

interest rates within the EU countries.

Improves employment across boarders

as the currency has the same value in all

countries

http://ec.europa.eu/economy_finance/publications/publication7309_en.pdf

http://www.youtube.com/watch?v=HoLNdBq9f5M

http://www.oxforddictionaries.com/definition/english/single-currency

http://www.ecb.europa.eu/ecb/history/emu/html/index.en.html

https://www.ecb.europa.eu/ecb/educational/facts/euint/html/ei_004.en.html

http://europa.eu/legislation_summaries/economic_and_monetary_affairs/introducing_euro_practical_aspects/l25007_en.htm