The Impact of the Euro on the Global Economy

From the American Dollar, Canadian dollar and Euro, these are all the common currency for their countries. The American dollar covers all their 50 states, the Canadian dollar covering all 10 provinces and territories and to the Euro which is the common currency for many of it membering countries. To name a few, Belgian Franc, Cypriot Pound, and Greek Drachma were the currencies in Europe that the Euro replaced.

The formation of the European Union made huge impacts to many. After the formation of the European Union, it was important for them to have a common currency, and with all of that it led to the discussion of Britain leaving the EU (Brexit) and the end result of Brexit. The formation of the European Union and the introduction of the Euro as a common currency has had a distratuos impact on the economy as well as some beneficial impacts for many of it’s membering states. The formation of the European Union made many impacts as they joined forces and formed as a Trade Bloc. The formation of the European Union began in 1951, with the formation of the European coal and steel community-- France, Germany, Italy and the 3 Benelux countries unified their coal and steel markets. It would make a return to war, materially impossible due to them being economically and politically secure. The GDP of the 6 members: France, Germany, Italy and the 3 Benelux countries grown steadily as the effect of the community rules on industrial production and trade kicked in. What began as a purely economic union has evolved into an organization spanning into policy areas, from climate, environment and health to external relations and security, justice and migration. The EU has delivered more than half a century of peace, stability and prosperity, helped raise living standards.

The European Union has had major impacts since it formation, recently the EU has 28 membering states. After the EU was formed, they launched a single European currency: the Euro. More than 340 million EU citizens in 19 countries now use it as their currency and enjoy its benefits. Thanks to the abolition of border controls between EU countries, people can travel freely throughout most of the continent.

And it has become much easier to live, work and travel abroad in Europe. All EU citizens have the right and freedom to choose in which EU country they want to study, work or retire. Every EU country must treat EU citizens in exactly the same way as its own citizens for employment, social security and tax purposes. Clearly as stated, the EU had major impacts after its formation since it led to common currency, being able to travel freely and much easier to live. Just by combining member states to union has shown to develop a lot of beneficial impacts.

BAFTAs agreement was signed by the three states on 13 September 1993 and came into force on 1 April 1994. On 1 January 1997, the agreement was extended to cover trade in agricultural produce. On 1 May 2004, all three states joined the European Union, and BAFTA ceased to exist. The EU is the world’s largest trading bloc, and second largest economy, after the USA. The initial aim of the EU was to create a single ('common') market for goods, services, capital, and labour by eliminating all barriers to trade and hence promoting free trade between members. However dealing with non-members, common tariff barriers were erected against cheap imports, such as those from Japan, whose goods prices were artificially low because of the undervalued yen. Free trade among its members was one of the EU's founding principles. This is possible thanks to the single market. Beyond its borders, the EU is also committed to liberalising world trade. Concluding Sentence:

After the formation of the European Union, it was a necessary component for them to have a common currency which impacted many of it membering states and resulting some states not adapting to the Euro. The purpose of the Euro is to provide a common currency throughout Europe. The European central bank and the European Commission are in charge of maintaining its value and stability and in charge of establishing the criteria required for EU countries to enter the “Euro Area”. It was necessary for the European Union to have their own common currency because economically it made sense. Greece has a population of only 10 million, less than Los Angeles. Denmark has half of that, at 5.5 million, which is about the same as Miami. Can you imagine Miami and la having their own currency? Single currency offers many advantages as it makes it easier for companies to conduct cross-border trade, the economy becomes more stable, and consumers have more choices and opportunities. It would also demonstrate a variety of political and economic obstacles barred the way: weak political commitment, divisions over economic priorities, and turbulence in international markets.

As the Euro came into play as a common currency it has had many impacts. The Euro is the form of money for the 19 member countries of the Eurozone, it's the second most widely used currency in forex trading after the US dollar. On January 1, 1999, the European Union introduced its new currency, the Euro. Originally, the Euro was an overarching currency used for exchange between countries within the union, while people within each nation continued to use their own currencies. Within three years, however, the Euro was established as an everyday currency and replaced the domestic currencies of many member states.

The Euro provided economic advantages to the citizens of the EU. Travel was made easier by removing the need for exchanging money, currency risks were removed from European trade, the citizens can easily identify the best price for a product without checking through a currency converter. This makes prices across the EU transparent and increases the competition between members. Labor and goods can flow more easily across borders to where they are needed, making the whole union work more efficiently. The biggest benefit of the Euro is that it is managed by the European Central Bank. The ECB has to balance the needs of all the member nations and therefore is more insulated from political pressure to inflate or manipulate the currency to meet any one nation's needs.

Although the Euro has been beneficial for some of its membering countries, however some states still do not use the euro as a common currency. Two countries have an official opt-out and do not have to adopt the euro while the other seven are legally obliged to join but haven’t yet. The two countries that have opted out are Denmark (which uses the Danish krone) and the United Kingdom (which uses the Pound sterling). The seven countries obliged to join are: Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, and Sweden.It’s not overly surprising that the UK does not use the euro, as the island country has always remained somewhat separate from the continent (and not just by water).

Most of the other EU countries that do not use the euro are in the process of getting approval. They must first join the ERM II ( the European exchange rate mechanism) and meet other financial criteria. These are following reasons why some EU nations do not use the euro: Independence in drafting monetary policies, independence in handling country specific challenges, independence lender of last resort, independence in inflation-controlling measures, and independence for currency devaluation.

Concluding Sentence

In spite of the Euro being a beneficial impact for many of its membering states, it will lead to positive and negative impacts as the discussion of Britain leaving the EU is up in the air. Brexit is the June 23, 2016, referendum where the United Kingdom voted to leave the European Union. The vote was 17.4 million residents in favor of leaving versus 15.1 million who voted to remain. Brexit is the term for Britain exiting the European Union. It would make sense for the United kingdom to leave the EU as their already not using the euro and they were not treated as they were apart of the EU.

As being apart of the EU and traveling within the EU, secondary scanning is not required; however any citizen with an British passport had to go through customs and secondary scanning.“Over the past few decades, a series of EU treaties have shifted a growing amount of power from individual member states to the central EU bureaucracy in Brussels. On subjects where the EU has been granted authority — like competition policy, agriculture, and copyright and patent law — EU rules override national laws.” The EU does not have the power to directly collect taxes, but it requires the membering states to make an annual contribution to the central EU budget.

With this as one of the requirements to be apart of the EU does not make sense for the UK to do so as they have their own currency and have their own annual contributions. Currently, the UK’s contribution is worth about £13 billion ($19 billion) per year, which is about $300 per person in the UK. While much of this money is spent on services in the UK, Brexit supporters still argue that it would be better for the UK to simply keep the money and have Parliament decide how to spend it. Experts have calculated that the European Union's growth will be slashed by 1.54% in the short term if britain leaves without an agreement. The deal is the following: the rights of Eu citizens in the Uk and british citizens in the EU, How much money the UK is to pay the EU ( 39 billion pounds), the backstop for Irish border. However, If there is no brexit deal, it will greatly impact the EU membering states.

To name a few if there is no deal brexit, Ireland will be losing 50,000 jobs which is more than 2.5% of its workforce, ireland will also 9 billion of value from its economy, France will lose 141,000 jobs, Germany will lose 291,000 jobs and Italy will lose 139,000 jobs. “Prime Minister Boris Johnson wants the EU to remove the backstop from the deal. He wants alternative arrangements and technological solutions instead. But the EU has so far refused to change the backstop. Under a no-deal Brexit, there would be no time to bring in a UK-EU trade deal. To cushion some of the impact, the government is looking at what might happen in a worst-case no-deal scenario. This includes: border delay, increased immigration checks, less food available and possible price increases for utilities, food and fuel. Overall, many financial analysts stated the if brexit was to happen without a deal, it would lead to a UK recession.