Why is the single currency so important? Discuss with relation to issues of economic and political union.

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Why is the single currency so important? Discuss with relation to issues of economic and political union.  

        The introduction of the single European currency on 1st January 1999 represented, without doubt, a revolution in the way economic matters of Europe are managed.  The economies of Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, The Netherlands, Austria, Portugal and Finland are now to a large extent harmonized under the one common currency, the Euro.   Never before has such a project been undertaken uniting currencies and cultures alike.  As deepening and widening of the European Union (EU) continues at a rapid pace, how does the single currency fit into the aims and goals of the European Council, and more importantly the aspirations of European citizens?  Why is the success Euro crucial to the EU’s long term stability and longevity?  What political opposition exists towards the importance of the Euro as a driving force for further political integration? It is these questions that this essay seeks to address, providing political and economic reasoning in support of my arguments.  

Economically speaking, the introduction of the Euro was primarily designed to create a more stable European economy.  Indeed, it was set out clearly in the Maastricht Treaty of 1992 as the underpinnings of all the European Commission’s financial objectives for the single currency.  As Temperton describes, these wishes were directly related the economic decline during the 1970’s and 80’s, where economies weakened across Europe, which were largely related to fluctuating oil prices worldwide.  Many economists use the term ‘eurosclerosis’ to describe this slump in economic growth during the last twenty years.  As a result of this, the importance of stability lies within its ability to drag the diverse currency base of Europe towards greater economic prosperity and to prevent a reoccurrence of eurosclerosis.  Eichengreen and Wyplosz describe how the economic principal of creating stability and, as a result instilling confidence into businesses across Europe can provide the strong financial outlook the EU needs for long term growth.  This process is cyclical, as more confidence is generated the greater the long term stability and success the Euro has.

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If the goal of economic stability is achieved then Europe has the capacity to become a world economic super power.  This would have the effect of elevating the participating European states to a position on the international stage that could not be achieved alone.  The key to economic stability comes from the fact that European Monitory Union creates the world’s largest internal market.  According to figures presented by Temperton, the EU holds almost one-quarter of the world Gross Domestic Product (GDP).  This is in stark contrast to only holding one-twentieth of the world’s population, thus creating an extremely powerful economic ...

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4/5 This is a good essay - at my Russell Group University it would probably gain a low 2.1 (as a first year essay). The major things it's missing are a consideration of a) the historical context of EMU (the snake, EMS etc), b) the political-economic costs and benefits (loss of monetary autonomy and why in the context of EMS this wasn't seen as a loss) and the Franco-German relationship. All of these factors explain why 'stability' - the factor the author's latched onto - is so important. Nonetheless this is internally cohesive and mostly factually correct, which is a good start for a first year EU essay!