European economic and monetary integration, and the optimum currency area theory. 2013. Business benefits – European Commission. Typically, there would be no solvency fears for governments under a fiat money regime because the national government could order the central bank to print more money. Viper is a quick and easy way to check your work for plagiarism. Axel Jörn (Author) Year 2015 Pages 23 Catalog Number V293971 File size 1882 KB Language English Tags Euro economy Eurozone Quote paper. As regards the benefits of euro area membership, these can be seen from two perspectives: from the perspective of the individual country and from the perspective of the euro area as a whole. Company Registration No: 4964706. The currencies of countries with larger economies tend to be more stable because they can spread risk more effectively. This would be more beneficial to medium sized UK businesses as they cannot currently take advantage of operating in the euro-zone and gaining profit like Shell and Vodafone and other larger companies. As a result, foreign currency bonds have a poor risk-return profile for most investors. Study guide [for] Macroeconomics [by] David C. Colander, Edward N. Gamber. [online] Available at: http://www.s-cool.co.uk/a-level/economics/the-euro/revise-it/should-the-uk-join-the-single-currency [Accessed: 10 Feb 2014]. Before the euro, successful companies in countries with weak currencies still had to pay high interest rates. Advantages of joining the euro: 1. European Union is an economic and political union established to support 28 member states. Originally, the euro was an overarching currency used for exchange between countries within the union. I will discuss these advantages and the disadvantages in the first part of my essay. [online] Available at: http://news.bbc.co.uk/1/hi/special_report/single_currency/25081.stm [Accessed: 8 Feb 2014]. It provides members with greater influence on international matters. 18th Jan 2018 The European single currency is a common legal tender currently used by 17 of the 27 member states of the Euro zone. eBook Collection (EBSCOhost), EBSCOhost [Viewed 9 February 2014]. 2010. International business. The euro – European Commission. This time, monetary policy was too tight rather than too loose. Disadvantages of the UK joining the single currency. Economics Essays: Why the UK will never join the EURO, Reducing the uncertainty affecting the profitability of international transactions, Better use of the common monetary reserves, Reducing losses due to different rates of inflation within EMU member countries, Improving macroeconomic management and cooperation, Improving macroeconomic stabilisation within EU Member States, Loss of income resulting from issuing currency. However, many of the holdouts peg their currencies to it in some way. Economics Essays: Why the UK will never join the EURO.. [online] Available at: http://econ.economicshelp.org/2007/03/why-uk-will-never-join-euro.html [Accessed: 9 Feb 2014]. 1. The Pros And Cons Of Joining The Euro 891 Words | 4 Pages. Therefore by adopting the euro the UK will have more opportunities for cross-border trade (Ec.europa.eu, 2013; CenuÅŸe and Drigă, 2010). Some of the key advantages and disadvantages of a country joining the single European currency (the Euro) are explored in this revision video. In theory, the euro should help countries that adopt it to support each other during a crisis. Baimbridge and Whyman (2008) quote Healey (2000: 19–20) who states that ‘while the benefits are significant, cumulative over time and reasonably uncontroversial, the costs are much more uncertain, widely exaggerated and almost certain to diminish with the passage of time’. The main benefits of the euro are related to increased trade. The euro allows these weaker countries to enjoy lower interest rates. They also provide links to various other sources and explain why this has been an on-going debate for the UK since the European Union formed. … Discuss The Difficulties Faced By The European Central Bank In Managing Monetary Policy In The Eurozone, Both Before And Since The Euro Crisis. 2007. Due to the fluctuating exchange rates, businesses would have to take into consideration either export prices being higher or companies being discouraged from exporting within a single market. For example new cars in Europe cost less than new cars in the UK, a single currency will remove this price differential. Brugesgroup.com. Upper Saddle River, N.J.: Prentice Hall. The euro is the single currency established in 1999, currently shared by 18 countries of the European Union’s Member States (Ec.europa.eu, 2014). The euro, which is controlled by the European Central Bank (ECB), was launched with great fanfare and anticipation. Here are the current advantages and disadvantages of the European Union to consider and discuss. “British Chamber of Commerce Economic Briefing”, paper presented at British Chamber of Commerce Economic Briefing, London, 17 February. A currency union is where more than one country or area shares an officially currency. Rickard, S 2002, ‘E-Day: the Impact of the Euro on UK Business’, Credit Control, 23, 1, p. 14, MasterFILE Premier, EBSCOhost, [Viewed 9 February 2014]. For this reason the Japanese company Mitsubishi Corporation is keen for the switch and the. D-Mark is the abbreviation for Deutsch Mark, the official currency of Germany until 2002 when the country adopted the euro (EUR). The euro system has created a large zone within Europe in which various countries all share the same currency. High cost of membership. Joining the euro would mean that the UK would have to adhere to new labour rules which in some cases govern how employees are hired and fired (Baimbridge and Whyman, 2008; Econ.economicshelp.org, 2007)). Ec.europa.eu. Germany has the largest economy in the eurozone and had a history of sound monetary policy since World War II. Problems with the policies. The cost of transitioning 12 countries' currencies over to a single currency could in itself be considered a disadvantage. The reason being despite it having many advantages it has few disadvantages as well. With a common currency, it will be easier to compare prices in different … This will be beneficial for investment and growth as the strength of the currency will improve (Ec.europa.eu, 2013). This will be especially troublesome for products that are accessible to cross border trade and will be reinforced by internet shopping (Baimbridge and Whyman, 2008). Wall, S., Minocha, S. and Rees, B. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of AUEssays.com. Labor and goods can flow more easily across borders to where they are needed, making the whole union work more efficiently. That's because the euro wasn't as risky to investors as a currency with less demand from users and traders. Like the Federal Reserve in the United States, it oversees the nation's banking system and monetary policy. European Commission – Europa. The first significant advantage which membership to the Euro brings is the fact that it will eliminate transaction costs of converting national currencies, with savings estimated at around £2 billion annually. VAT Registration No: 842417633. See the answer. Operating as a single market and following common poli… Also less volatile interest rates will allow businesses to borrow at cheaper rates and also invest more confidently in the long term (Ec.europa.eu, 2013; Irons and Colander, 2002). To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on the UKDiss.com website then please: Study for free with our range of university lectures! European Commission – Europa. The only constant was that the euro continued to work in favor of Germany. Portugal, Italy, Ireland, Greece, and Spain all faced high debt, high interest rates, and high unemployment. Initially, there was not enough collective action. Not joining the Eurozone would also have its costs, internationally, because countries that gained their EU membership, similarly committed to joining the Eurozone, after meeting the Maastricht criteria. Smaller ones have the advantage of being backed by Europe's powerhouse economies, Germany and France. This single currency system has one major advantage, as … In fact, the euro caused precisely the opposite of standard economic policy to be implemented during the European sovereign debt crisis. Irons, J. S. and Colander, D. C. 2002. The first stage of the euro was the European exchange rate mechanism (ERM), under which prospective future members of the eurozone fixed their exchange rates to the German mark. With the euro, investors in low interest rate countries, such as Germany and the Netherlands, were able to lend money to firms in other eurozone countries without currency risk. In order to achieve the goals identified above, a variety of different sources have to be explored. What Are the Advantages of the European Union? A Study of the Benefits and Costs which Might Result for UK-based Firms Should the UK Adopt the Euro. S-cool.co.uk. Adopting the Euro in Central Europe, Challenges of the Next Step in European Integration: Occasional Paper. On the other hand, less efficient firms in nations with stable currencies enjoyed relatively low interest rates. The euro is still not universally adopted by all the EU members as the main currency. In the 1990s, Germany pursued a looser monetary policy to deal with the burdens of reunification. European Economic and Monetary Union (EMU) Definition. The offers that appear in this table are from partnerships from which Investopedia receives compensation. As a result, the U.S. dollar is one of the most stable currencies in the world. Benefits of Joining Euro Lower transaction costs for firms and consumers evaluation – only a small % of firms turnover Greater certainty for firms investing in capacity to export to Europe. Eurozone governments improved availability of information, European businesses can easily lock in the second part i will discuss advantages! 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