2. In this presentation...
• We are going to discuss 6 reasons for the
implementation of a single currency.
• We are then going to discuss one
disadvantage of a Single Currency area.
• We are going to use The Euro as our
example.
3. Elimination of exchange rate
fluctuation
•
The Euro has eliminated the damaging effects of
exchange rate tensions within Europe. In terms of
growth and employment the Euro has eliminated
shocks which were often costly in the past.
•
It has also enhanced the prospect and eliminated
the cautions of trade and investment within the
countries in Europe.
http://ec.europa.eu/economy_finance/publications/publication7309_en.pdf
http://library.thinkquest.org/19110/english/advantag/index.html
4. ERM
• The ERM (Exchange Rate Mechanism) was
set up to regulate the exchange between
different trading countries within Europe.
• The ERM II set up in January 1999 was the
revision of the ERM.
• This provided the frame work to manage the
exchange rates between EMU (European
Monetary Union) and non participating
member states to ensure stability.
http://ec.europa.eu/economy_finance/euro/adoption/erm2/index_en.htm
5. Price Transparency
• Price transparency is being able to tell easily
if a price in one country is better than the
price in another, this is beneficial for both
consumers and businesses.
• With price equalisation across boarders
businesses have to be more competitive.
• Prices still vary but consumers can easily
spot a good deal.
http://www.howstuffworks.com/euro10.htm
6. • We used BMW as our example. We found
that a brand new 1 series is €22,700 in
Germany and €22,995 is Ireland.
• With the use of price transparency it is easy
for consumers to find the best deal within
trading countries.
www.google.ie
www.bmw.com
www.frankkeane.ie
7. Transaction Cost
• Since the Euro has been introduced
transaction costs have been eliminated
within Euroland countries.
• It has been particularly helpful to tourists
and others who cross several boarders
whereas before they had to pay to exchange
their money.
http://www.howstuffworks.com/euro10.htm
8. The removal of transaction costs
benefitted:
• There are no longer any costs arising from buying
and selling foreign currencies on the foreign
exchange markets.
•
It protects against adverse exchange rate
movements.
•
There are no longer any costs for cross-border
payments in foreign countries which entailed high
fees.
•
There is no longer any need to keep several currency
accounts.
http://www.ecb.europa.eu/ecb/educational/facts/euint/html/ei_007.en.html
9. Increased cross-border
employment
• People are now more employable across
borders.
• With a single currency it eliminates difficulty
for people to cross into the next country for
work as their salary would be paid in the
same currency.
http://www.howstuffworks.com/euro10.htm
10. •
Under the EC (European Commissioner) Treaty
individuals are entitled to move freely for work
reasons from one EU Member State to another.
•
Cross-border workers are people who work in
one EU state but live in another.
•
Organisations of all sizes are taking advantage of
the increasing ease with which human capital can
be shared across borders.
•
Cross-border workers usually work in a
different Euroland country during the week and
return to their home country at the weekends.
http://ec.europa.eu/taxation_customs/taxation/personal_tax/crossborder_workers/
http://www.fullerllp.com/index.php/services/tax/cross-border-employment
11. Expanding markets for
business
•
Due to the implementation of The Euro businesses
can now expand more easily into neighbouring
countries.
•
It is no longer necessary to set up different
accounting systems, banks, etc. if the same
currency is being used.
•
Businesses benefit greatly from the introduction of
The Euro as their customer base is largely
increased.
•
An example of this is online shopping.
http://www.howstuffworks.com/euro10.htm
12. Macroeconomic
Stability
• Because of the European Central Bank
(ECB), the introduction of The Euro also
helps to lower and control inflation among
EU countries.
• Low level of inflation are what make
economies stable.
• High inflation rates are generally viewed as
undesirable and cause less investments to be
made.
http://orderflowforex.com/2011/07/disadvantages-of-the-euro/
13. • When inflation is controlled among these
countries it encourages investment and
therefor leads to growth of economies
within the Euroland.
www.google.ie
14. Disadvantage of The Euro
• The formulation of The Euro has abolished
independent monetary policies for every
country within The Euroland. When each
country had their own currency if they ran
into economic trouble that country could
then slash their interest rates and could also
devalue their currency.
• This process could be done by The Central
Banks or the market would do so itself if
recession was brewing and lower interest
rates were apparent.
http://orderflowforex.com/2011/07/disadvantages-of-the-euro/
15. • Being able to slash interest rates and
devaluing a currency are powerful recession
fighting tools which the countries of The
Euroland have lost out on.
• In respect to this disadvantage it could be
considered a smart move by Britain to retain
an independent currency as the economic
recession has not effected Britain as
dramatically.
http://orderflowforex.com/2011/07/disadvantages-of-the-euro/
