EURO

Advantages and Disadvantages of Joining Euro

Introduction

The in-adequate policies, credibility of organizational structure and the political struggle between the member countries is a concern for the European monetary System. This is a question mark on the role of the European monetary system. The inadequate organizational structure and ideological frame work of the European monetary system is the main reason for the crises. There are several treaties in the European monetary system like Maastricht Treaty and the Stability and growth Pact. This is controlled by the ECB for the entire euro zone (BOUVET, and KING, 2011, pp. 743-756). The result of these treaties and pact was the amalgamation of the monetary and fiscal policy. This had major impact on the social and economic sector of the amalgamated countries.

This European System is one of the most autonomous and independent monetary system in the world. Yet there are internal grouping and politics going on in the system decision making. The ECB has highest degree of independence than the German Bundesbank although both of them function on the same definition of the monetary stability and financial principles. Thus, this huge independence and autonomy for ECB had raised several eyebrows and question is raised about the legitimacy of its decisions, since the norms of democratic accountability and transparency are compromised (CANDELON, and PALM, 2010, pp. 81-99).

Discussion

The UK and Sweden don't use the Euro. They are members of the European Union, and participate in policies like lower barriers to trade and travel. But they have their own currencies (pound sterling and krona) (CANDELON, and PALM, 2010, pp. 81-99). For the 16 nations that use the Euro, the perceived advantages are mainly that they have a common currency whose value is stabilized by the strength of the German economy (so they avoid the currency fluctuations that create friction which would otherwise impair trade among each other). In addition, the European central bank focuses on keeping inflation low.

The disadvantages are that a Euro-bloc member nation doesn't have control over its currency any longer. So it can't do things like devalue when it wants a trade advantage for itself. And you're stuck with borrow and spend members like Greece, Portugal, Spain and Ireland, which haven't been as fiscally disciplined as required under EU standards. They're supposed to keep national government deficits at 3% or less of GDP, but haven't. In addition, they and other EU members have used derivatives transactions to obscure fiscal profligacy. So a potentially major disadvantage of joining the Euro-bloc is that you have the joy of helping to bail out the member nations that can't control their deficit spending (FIDLER, 2010).

The Advantages of the Euro are Mainly in the Economical Sense

1. Both consumers and firms would are able to make significant savings in the cost of transactions within the Euro-zone, leading to the development of Europe wide markets for goods and services as a result of not having to convert currencies. This is already benefiting many poor regions of ...