Essay question: Discuss the main costs and benefits of Monetary Union in the EU .
Name: Joao Santos
Ten years ago , on January 1, 1999 the euro started circulating as a common currency for 11 of the 15 European Union countries, with Greece joining in 2001 and Slovakia in January 2009. (1)
Eleven of the fifteen members of the European Union participated in this new currency, the euro, voluntarily giving up their national currency for a common one. The United Kingdom, Sweden, and Denmark have refused to take part in economic and monetary union. (2)
When the EU was founded in 1957, the Member States concentrated on building a 'common market' for trade. However, over time it became clear that closer economic and monetary co-operation was needed for the internal market to develop and flourish further, and for the whole European economy to perform better, bringing more jobs and greater prosperity for Europeans. In 1991, the Member States approved the Treaty on European Union (the Maastricht Treaty), deciding that Europe would have a strong and stable currency for the 21stcentury.(3)
The ratification of the Maastricht treaty in November of 1993 signalled the creation of the European Monetary Union which was intended to guarantee price stability, with an annual inflation rate inferior of two percent for the entire euro area. (1)
1 - BENEFITS
• Reduction in the transaction costs of firms that import or export by elimination of the need to exchange currencies between EMU members, causing a saving of around $30 billion a year. (1)
• Consolidation of the Single Market, an end to destabilising currency shifts within Europe, price convergence and price stability (4); the existence of a stable monetary anchor is essential and represents a counterbalance to the dollar.(8) (10)
• The use of a single currency allows easier price comparison across the participating Member States which in turn stimulates competition....