The European Monetary Union Essay

602 words - 2 pages

The European Monetary Union

The European Monetary Union (EMU) serves as an economic necessity, a complement to the European single market, which is the free movement of people, goods, services, and capital within the European Union (EU). The Euro, a single currency created under ideals of the Maastricht Treaty, will strengthen European unity and constitute as a factor for stability, peace, and prosperity for all member states as well as potential participants like Great Britain.
Financial markets in Europe are profoundly affected by the Euro beginning from its launch on January 1, 1999. A single currency encourages more efficient, integrated markets with stronger financial flows and lower financing costs for borrowers. Government bond markets were quickly transformed into a single European bond market. Most outstanding debt and all new debt issued by member states are denominated in Euro to create the second largest market after the US dollar government bond market. This means that financial institutions, payment systems, and clearing systems are operating in Euro and that businesses and citizens can use financial products denominated in Euro, including company shares.
Several economic reasons advocate Great Britain’s involvement with the EMU. The overall benefit that the Euro will bring to Britain is a stable economic environment leading to low inflation and low interest rates. Member states achieve savings in four areas: reduction in costs due to the elimination of currency exchange, enforcement of efficiency through healthy competition in Euroland, stabilization of fluctuating interest rates, and creation of employment opportunities.
First, uniform currency will help to eliminate the costs associated with currency exchange within the Euro zone. It is predicted that the Euros will produce an estimated saving up to one percentage point of annual EU...

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