The Argument for and Against a European Single Currency Essay

The Argument for and Against a European Single Currency - Essay Example The current paper presents the arguments that have been stated for and against a single European currency. The review of the relevant literature leads to the conclusion that the establishment of a single currency zone across Europe was not carefully planned; as a result, inequalities in the economic development of member states have been unavoidable. In addition, for certain member states, such as Greece, Italy, Spain, Portugal and Ireland the entrance in the eurozone resulted to the severe economic crisis; this phenomenon has been related to the decision of these countries to leave their national currencies and to adopt euro. In general, if compared, the arguments for and against a single European currency seem to verify the negative impact that euro had on the national economies of most member states; the above risk should have been predicted in advance by developing appropriate tests and plans of emergent exit, in case of unexpected failures. 2. Arguments for a single European cur rency The European Monetary Union was established in 1999 (Arestis et al. 2001). The preparation for the establishment of EMU has started about 10 years before, in 1989 (Arestis et al. 2001). The establishment of the ‘European Monetary Institute in 1994’ (Arestis et al. 2001, p.29) was considered as a necessary step for promoting the creation of a single currency zone. In the years that followed, the arguments for the single European currency have been quite strong. More specifically, it was supported that a single currency could result in ‘lower prices and better resource allocation’ (Stivachtis 2013, p.329). In such case investment in the Union would be highly increased, a fact that could result in the significant increase of productivity and the limitation of unemployment in European Union (Stivachtis 2013). In addition, having its own currency would make the European Union a key player in the global market which is dominated by a dollar (Stivachtis 2013 ). At the next level, the establishment of a single currency zone could lead to the important limitation of transaction costs between member states, a fact that would favor the economies of all member states, a benefit that was never achieved through (Stivachtis 2013). Moreover, the need for the introduction of a currency that would be able to face pressures from other currencies and to set barriers to important fluctuations in exchange rates globally was emergent (Arestis et al. 2001). Particular emphasis has been given to the following fact: by joining the Eurozone, a member state could secure the stability of its economy: its currency would not be exposed to the fluctuations of exchange rates, a common phenomenon in the global market (Shuibhne and Gormley 2012).