The Affect of The Euro

The Affect of The Euro

Published:   12 Dec at 9 AM

By:Admin

Big foreign exchange decision? Just ask the FX Experts at TorFX for a Quote »

At the beginning of 2002, the first
day of the year in fact, the euro became the only currency of twelve
different members of the European Union, a move that made it second
only to the United States dollar as the most used currency in the world.
This decision was also the biggest change of currency in the history
of the world and the twelve founding members have now been joined by
a further four that have withdrawn their currency and joined the euro.

This mammoth decision to have one
communal currency originated when British prime minister Winston Churchill
first proposed the development of what he called the “United States
of Europe” - a primitive version of the European Union. Churchill's
main aim for this co-operative were predominantly political as he believed
that by creating one unified government, they could bring much longed-for
peace to a continent that had been ravaged by amongst others, the two
world wars.

Winston Churchill's suggestion
and his main aims are the backbone of the European Union as the euro
is essentially a way in which the member nations were able to really
enhance and lock in political solidarity to prevent further wars. However,
this is not the only benefit to the euro as it also had a big economic
effect on those that joined as it essentially unified the various separate
economies. In terms of the economy, the main advantages of being part
of the euro include:

• Elimination of exchange-rate
  fluctuations - By having one currency shared by all the countries
  involved, the euro basically removes the possibility of fluctuations
  in the currency values between those countries which obviously has numerous
  economic benefits.


• Transaction costs
  - Many holiday makers and businessmen who travel through various countries
  in the course of their activities, they would be required to exchange
  the different currencies as they go through different nations. Having
  to do this can result in the commission charges and other costs involved
  in currency transactions really beginning to add up. However, with one
  common currency they do not need to worry about transaction costs and
  for many travellers, they may never need to change currency at all as
  their domestic currency is the same as the country that they are visiting.


• Increased trade across
  borders - By having a transparent, simple common currency,
  there is no need to worry about the fluctuations in the exchange rate
  or the transaction costs so this makes trading across the borders a
  much more simple task and as result, the use of the euro encourages
  more importing and exporting between member nations.


• Increased cross-border
  employment - By having one set currency for several nations, it
  is made much easier to cross these country borders in order to seek
  work. The main reason for this is that their salaries can be paid in
  the same currency that they use in their own nations.

« Business Trading Abroad

Hedging Your International Payments »