Pros and Cons of the Euro
Pros and Cons for and against the Euro
In the table below a number of arguments for and against a single European currency have been compiled. For the success or failure of the single European currency much depends on the size of the effects described below. Do the gains from reduced transaction costs, the disappearance of exchange rate instability, and greater price transparency outweight the losses from the cost of introducing the new currency and possible macroeconomic adjustment costs? Judge for yourself: Arguments for a single European currency | Arguments against a single European currency | Transaction CostsHaving to deal with only one currency will reduce the cost of converting one currency into another. This will benefit businesses as well as tourists.No Exchange Rate UncertaintyEliminating exchange rates between European countries eliminates the risks of unforeseen exchange rate revaluations or devaluations.Transparency & CompetitionThe direct comparability of prices and wages will increase competition across Europe, leading to lower prices for consumers and improved investment opportunities for businesses.StrengthThe new Euro will be the among the strongest currencies in the world, along with the US Dollar and the Japanese Yen. It will soon become the 2nd-most important reserve currency after the US Dollar.Capital MarketThe large Euro zone will integrate the national financial markets, leading to higher efficiency in the allocation of capital in Europe.No Competitive DevaluationsOne country can no longer devalue its currency against another member country in a bid to increase the competitiveness of its exporters.Fiscal DisciplineWith a single currency, other governments have an interest in bringing countries with a lack of fiscal discipline into line.European IdentityA European currency will strengthen European identity. | Cost of IntroductionConsumers and businesses will have to convert their bills and coins into new ones, and convert all
In the table below a number of arguments for and against a single European currency have been compiled. For the success or failure of the single European currency much depends on the size of the effects described below. Do the gains from reduced transaction costs, the disappearance of exchange rate instability, and greater price transparency outweight the losses from the cost of introducing the new currency and possible macroeconomic adjustment costs? Judge for yourself: Arguments for a single European currency | Arguments against a single European currency | Transaction CostsHaving to deal with only one currency will reduce the cost of converting one currency into another. This will benefit businesses as well as tourists.No Exchange Rate UncertaintyEliminating exchange rates between European countries eliminates the risks of unforeseen exchange rate revaluations or devaluations.Transparency & CompetitionThe direct comparability of prices and wages will increase competition across Europe, leading to lower prices for consumers and improved investment opportunities for businesses.StrengthThe new Euro will be the among the strongest currencies in the world, along with the US Dollar and the Japanese Yen. It will soon become the 2nd-most important reserve currency after the US Dollar.Capital MarketThe large Euro zone will integrate the national financial markets, leading to higher efficiency in the allocation of capital in Europe.No Competitive DevaluationsOne country can no longer devalue its currency against another member country in a bid to increase the competitiveness of its exporters.Fiscal DisciplineWith a single currency, other governments have an interest in bringing countries with a lack of fiscal discipline into line.European IdentityA European currency will strengthen European identity. | Cost of IntroductionConsumers and businesses will have to convert their bills and coins into new ones, and convert all