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Is the euro an asset for the European economies?

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According to the typology of Balassa, economic and monetary union represents the highest degree of economic integration. Thus it is a supranational authority that leads, at least in part, the economic policy of a group of countries adopting a common currency.

A realization of this type represents the introduction of the euro on 1 January 1999 in 12 countries of the European Union, something that was named "Stage Three of Economic and Monetary Union (EMU).

Eurozone appears to be a unique experience both for because of its extent and the lag between monetary policy, conducted at the community level, and other economic policy instruments that remain largely the responsibility of member states - although the Pact stability oversees national budgetary policies.

In this unique setting, the single European currency is an asset, and a vehicle for growth? This is not to replicate the terms of debate that existed in Europe before the adoption of the Euro, but rather to judge the merits and defects of the Euro in light of the early years of its existence.

Firstly, the creation of the single currency has caused the cancellation of the transaction costs associated with foreign exchange transactions like the financial costs, administrative costs and accounting costs.

Businesses emerge and additional resources available may be allocated to the production or finance price reductions. Then, the disappearance of currency risk within the euro area is a reduction factor of uncertainty: the choice of economic agents taking place in a less uncertain area, where information is more reliable.

Tags: European economies, introduction of euro, euro as an asset to the European economies

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