The European Economic and Monetary Union (EMU) refers to all of the countries that have adopted a free trade an monetary agreement in the Eurozone. As growth slowed and unemployment increased in countries like Italy and Greece, investors feared for their solvency, driving up interest rates. However, pegging exchange rates to the German mark may have created a bias in favor of Germany. By adopting the euro, the UK may be open to instability, lower growth, higher unemployment and economic decline due to not being able to set their own interest rates based on the national economy (Kern, 2002). According to the KPMG report, an estimated 3,000 firms face total costs of up to €56.5 million (£35.8 million) (Baimbridge and Whyman, 2008). Adopting the Euro in Central Europe, Challenges of the Next Step in European Integration: Occasional Paper. 1. Advantages & disadvantages of single currencies / monetary integration. It is common for parts of the EU to be prospering, with high growth and low unemployment. Kern, D. 2002. This might lead to lack of confidence in the economy. Problems with the policies. News.bbc.co.uk. With a common currency, it will be easier to compare prices in different … Non-economic factors include: psychological and political advantages and disadvantages. Viper is a quick and easy way to check your work for plagiarism. European Union Advantages And Disadvantages. 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)). It would be fair to say that the euro contributed to an economic depression in Greece. 2013. Business benefits – European Commission. Within three years, however, the euro was established as an everyday currency and replaced the domestic currencies of many member states. For this reason the Japanese company Mitsubishi Corporation is keen for the switch and the. Topic: Analyse the main advantages and disadvantages of European Union enlargement for a) existing members and b) for applicant countries. The euro was created to promote growth, stability, and economic integration in Europe. Within the EU, each member state has its own financial system; therefore the introduction of the Euro will make a different impact on each country's economcy. Advantages Disadvantages 1. More importantly, France and Germany supported a recovery fund worth over 500 billion euros. Travel was made easier by removing the need for exchanging money. The online scanning system matches your work against over 5 Billion online sources within seconds. As the debate about the UK adopting the euro is consistently in the news and is a much talked about issue due to the economic and political implications, there will be a number of web based sources that will be explored such as; These amongst other online sources will also give different opinions on the question asked and will be useful as a source before further reading or research is carried out. Disadvantages and Advantages of a Single Currency 1679 Words | 7 Pages. Disclaimer: This work has been submitted by a university student. For example new cars in Europe cost less than new cars in the UK, a single currency will remove this price differential. What Are the Advantages of the European Union? [online] Available at: http://ec.europa.eu/economy_finance/general/pdf/how_the_euro_benefits_us_all_en.pdf [Accessed: 8 Feb 2014]. The euro allows these weaker countries to enjoy lower interest rates. This will help to improve economic welfare and also remove the risk of unforeseen exchange rate revaluations or devaluations (Historylearningsite.co.uk, 2013; Irons and Colander, 2002). S-cool.co.uk. Brugesgroup.com. In present times it would seem an unpopular decision. [online] Available at: http://news.bbc.co.uk/1/hi/special_report/single_currency/25081.stm [Accessed: 8 Feb 2014]. By keeping the interest rate low or stable, this can improve profitability of exports and more businesses will want to invest in UK firms. The European Union (EU) is a group of countries that acts as one economic unit in the world economy. 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. Increase of costs necessary to make “shock” adjustments. Smaller ones have the advantage of being backed by Europe's powerhouse economies, Germany and France. Its main drawback is that it is a fiduciary currency. Upper Saddle River, N.J.: Prentice Hall. In theory, countries with high unemployment do not need to worry much about inflation because of the availability of the unemployed to produce more goods. Countries receive many benefits for adopting the euro. That makes prices transparent and increases the competition between firms in countries using the euro. There are many benefits to adopting the euro for the UK and for businesses alike which include eliminating risks and cutting costs. for and against the UK joining the European single currency. This article provides you with the pros and cons of EU to evaluate before buying a membership. Benefits of joining the euro area . The euro was created on January 1, 1999, and it was designed to support economic integration in Europe. It is easier to cross borders in Europe today because of the EU.The Schengen Visa might make it easier for the average person to travel throughout Europe and its controlled territories, but it can also become a security nightmare. | S-cool, the revision website. Like the Federal Reserve in the United States, it oversees the nation's banking system and monetary policy. Initially, there was not enough collective action. A single currency should end currency instability in the participating countries (by irrevocably fixing exchange rates) and reduce it outside them. Reference this. Although stocks also have exchange rate risks, the impact on bonds is far greater because of their lower volatility. On the downside, the euro was blamed for overly rigid monetary policy and accused of a possible bias in favor of Germany. 2010. International business. The European Union & Enlargement: Benefits, Advantages, and Disadvantages DJM2 Daniel Mason Jeffrey Prevost Merwyn D'Cruz Michelle Hahn Abstract This paper will describe the European Union and its origins, define enlargement, and name the EU member countries and the prospects of EU membership. As the labour market is more flexible in the UK than it is in others in the euro and UK firms have more independence with employment, joining would be detrimental for the firms as the cost of production would increase and unions would have more power (S-cool.co.uk, 2014; Brugesgroup.com, 2014). 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! Economics This time, monetary policy was too tight rather than too loose. Due to the number of advantages such as the stimulation of trade and disadvantages such as economic instability, the decision for the UK to adopt the euro is a big economic and political debate at present which will affect businesses and the public in many ways. The advantages of the euro include promoting trade, encouraging investment, and mutual support. Joining the EU member states, countries can increase GDP growth and prosperity. Inefficient firms will suffer mostly from this and profits will be reduced due to higher levels of competition. Operating as a single market and following common poli… The issue of monetary policy has been in the center of all debates from the early establishment of the Euro … European Union is an economic and political union established to support 28 member states. 1012 Words 5 Pages. The currencies of countries with larger economies tend to be more stable because they can spread risk more effectively. What are Advantages and Disadvantages of Euro zone Membership? The euro was created because a single currency offers many advantages and benefits over the previous situation where each Member State had its own currency. 2013. Price transparency. Or, the fiat currencies are not based on a real standard, but on the simply trust of people. European Commission – Europa. It provides members with greater influence on international matters. Because there are fewer travel restrictions in place, the number of people who can make their way across a border without documentation or with a false ID continues to rise. So ultimately it seems that the higher capital costs and an overvalued exchange rate are the results of not joining the euro as well as receiving fewer European visitors (Rickard, S 2002). The cost of transitioning 12 countries' currencies over to a single currency could in itself be considered a disadvantage. Discuss The Difficulties Faced By The European Central Bank In Managing Monetary Policy In The Eurozone, Both Before And Since The Euro Crisis. The euro – European Commission. Due to the number of advantages such as the stimulation of trade and disadvantages such as economic instability, the decision for the UK to adopt the euro is a big economic and political debate at present which will affect businesses and the public in many ways. The Unpredictable Character of British Pound And The Euro Exchange Rate. Based on the findings above the general benefits for the UK businesses adopting the euro are as follows; The costs for UK businesses on the other hand are as follows; Comparing the two lists, it would seem that it wold be best for the UK to adopt euro as businesses would benefit from the lower transaction costs, lower cost of capital and better price transparency which could lower invoices and costs of raw materials. There are now 13 nations who have joined this treaty where in which they have adopted a common currency between them that is EURO. The primary risk in lending across borders was the currency risk, instead of default risk. 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. 2011. While there are many advantages to the euro, there are also some disadvantages. 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. The prices of most debt instruments are so stable that exchange rates influence returns far more than interest rates or credit quality. Was tested by a series of challenges early in the world: &. Their lower volatility from single Market to single currency | Pros and Cons returns... 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