2. European Union
• The EU is a unique economic and political
partnership between 28 European countries that
together cover much of the continent.
(http://europa.eu/about-eu/)
• The EU uses a single currency which is the euro (€).
• The ECB is the central bank for Europe, its main task
is to maintain the euros purchasing power and price
stability in the euro area.
• The euro area comprises the 17 European Union
countries that have introduced the euro since 1999.
(http://www.ecb.europa.eu/ecb/html/index.en.html)
3. Disadvantage of a Single
Currency
Countries that join the euro do not have control over their own
interest and exchange rates, the ECB (European central bank)
decides the overall rates for all countries in the Euroland.
• An interest rate is a rate which
is charged or paid for the use
of money and is often expressed as
an annual percentage.
•
http://www.investorwords.com/2539/interest_rate.
html
http://economics.about.com/cs/economics
glossary/g/exchange_rate.htm
An exchange rate is the
current market price for which
one currency can be
exchanged for another.
4. Why don’t they have control?
• They don’t have control because any country that
joins the euro hands over control of their rates to the
ECB.
Why would they want control?
• Countries would want control of their rates so they
could higher or lower them to encourage imports
and exports. Some countries in the euro could be in
recession and some could be in boom so because of
this the individual countries would need to adjust
their rates to suit their current stability.
5. Six Reasons for the
Implementation of a Single
Currency such as the Euro
For Businesses:
• Increases cross-border trading
• Increases borrowing, better planning and more
investment
• Better access to capital
For Consumers:
• A more competitive market
• Stable Prices
• More job opportunities
http://ec.europa.eu/economy_finance/euro/why/business/index_en.htm
http://ec.europa.eu/economy_finance/euro/why/consumer/index_en.htm
6. Increases cross-border
Trading
• A direct benefit of the euro is that, within the euro
area, there is no need for businesses to work in different
currencies.
• A company can buy and sell throughout this area, paying
and being paid in euro.
• Not only can companies sell into a much larger ‘home
market’, but they can also find new suppliers offering
better services or lower costs.
• With no exchange risks and costs, cross-border trade
within the euro area is encouraged.
http://ec.europa.eu/economy_finance/euro/why/business/index_en.htm
7. Increases borrowing, better
planning & more investment
• Before the euro, volatile interest rates meant
unpredictable costs.
• With the euro, inflation has come down to a low and
stable level, which also means low and stable interest
rates.
• Firms can borrow more and more cheaply and can invest
more confidently in the long term.
• Companies can invest more in growth and new
technologies rather than saving money in reserve in case
of an economic downturn.
http://ec.europa.eu/economy_finance/euro/why/business/index_en.htm
8. Better Access to
Capital
• Investors, such as banks, are no longer limited
to local markets.
• Capital can flow more easily because exchange
rate risks have disappeared and because
financial market rules are being progressively
harmonised – allowing investors to move
capital to those parts of the euro area where it
can be used most effectively.
http://ec.europa.eu/economy_finance/euro/why/business/index_en.htm
9. A more Competitive
Market
• The euro brings price transparency to the single
market.
• Consumers can easily compare prices across
borders and find the cheapest price for a product
or service.
• This is because increased price transparency has
the effect of increasing competition between
shops and suppliers, keeping downward pressure
on prices in the euro area.
http://ec.europa.eu/economy_finance/euro/why/consumer/index_en.htm
10. Stable Prices
• Inflation fell as they started preparing for the
euro and, since its introduction, has remained
around 2% in the euro area.
• Price stability means that ordinary citizens’
purchasing power and the value of their
savings are better protected, which helps
make the future more certain.
http://ec.europa.eu/economy_finance/euro/why/consumer/index_en.htm
11. More job
Opportunities
• Since the euro was introduced you no longer
need a working visa to work in any country in
Europe making it easier to find jobs abroad.
• Since the euro was introduced in 1999, more
than 10 million new jobs have been created in
the euro area, compared with only 1.5 million
in the previous seven years.
http://ec.europa.eu/economy_finance/euro/why/consumer/index_en.htm
12. (Colm Kelpie, 13 Nov 2013)
http://www.independent.ie/business/world
/despite-brussels-calling-the-shots-werestill-hooked-on-the-euro-29748955.html
