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The Euro Debate

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Introduction

Contents Page Sub-heading Page What is the Euro? 2 What is Economic and Monetary union? 2 What determines the external value of the Euro? 2 What Monetary and financial precepts do participating states have to follow? 2 So how does it work? 3 Why is the Euro in trouble? 3 Why did the Euro get so weak? 3 Why does everybody criticise the European Central Bank? 3-4 So that's it for the Euro, then? 4 Does monetary union bring any advantages at all? 4-5 And what do the Euro critics say? 5 Personal views 5 Bibliography 6 What is the euro? The euro is the single currency of the European Monetary Union, which was adopted by 11 Member States from 1 January 1999. The 11 Member States are Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland. Greece became the 12th Member State to adopt the Euro on 1 January 2001. The name "euro" was chosen by the European Heads of State or Government at the European Council meeting in Madrid in December 1995. What is Economic and Monetary Union? ...read more.

Middle

To invest in US companies, they had to sell euros and buy dollars, which drove down the euro's value on the market. Another factor were stock market investment flows. Higher productivity of US firms resulted in higher company earnings. Coupled with high interest rates, this made the United States a preferred destination for European stock market investors. Once again, the euro was sold in favour of dollar investments. At the beginning of the year, the picture changed. The US economy slowed down sharply, while eurozone kept posting strong growth. US stock markets, meanwhile, were in deep trouble. Both factors boosted the euro - but not enough to push it to its launch value. As a matter of fact, as signs of a slowdown of the eurozone emerged, investors fled yet again into the dollar, even though the economic prospects of the US economy are still markedly worse than those of the 12 countries using the euro. Why does everybody criticise the European Central Bank? It's a question of market confidence. Currency traders are still unhappy with how the ECB conducts its monetary policy. ...read more.

Conclusion

Could small states be outvoted by big economies? Will large countries outmanoeuvred by the small nations ganging up against them? Will economic and monetary union not ultimately force all members to harmonise taxes and other policies, thus eroding political sovereignty? And what happens during a serious economic crunch? Competitive devaluation - as Brazil's government did during its economic crisis in 1999 - would not be an option anymore. Personal Views In my personal opinion, joining the Euro would be a bad thing for the United Kingdom. Throughout this project I have weighed up the good and bad points, the pro's and con's, of the United Kingdom joining the Euro, and although there are advantages to joining the European single currency, I still believe that there is no need for this change, and that the UK economy will prosper without joining the Euro. Over the years we have learned to use the strength of the pound to our advantage, and have successfully used interest rates as leverage in business deals and suchlike. Such an upheaval in our economy must have a huge advantage or it is not worth doing, and in my eyes, the chaos of this historic change would out-weigh the advantages it would bring us. ...read more.

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