In 2009, the euro was the official currency of 330 million users, located in 16 countries in Europe, and accounted for about 16% of global GDP. The single currency of the Euro zone is now the second most important currency in the world, and enjoys a broad consensus about its effectiveness. The idea of a single currency is not new in European construction, but it has been slow to materialize. The principle of economic and monetary union emerged from the Werner Plan in 1971, without meeting with much success.
However, from the 90s, the idea of a single currency resurfaced, and the realization of a common market in 1992 with the Maastricht Treaty created the framework for a common currency. Thus, after long and exhausting negotiations, the Euro was established on 1st January 1999.The creation of the euro is thus intrinsically linked to the need to end monetary instability, and complete the European economic integration. Not only does the euro eliminate the risk of fluctuation and exchange costs while strengthening the single market, but it also encourages closer cooperation between Member States to ensure economic and monetary stability.
Yet there is a debate about its future. While some people argue that the slowing down of growth in the euro zone is primarily the consequence of the single currency, and thus suggest an abandonment of the euro, others argue the important capability of stabilization of the euro, and instead recommend further strengthening. Finally, its aim to become the leading international currency is being increasingly discussed. The question of the future of the euro has not been decided, especially in the current crisis, but it is clear that a return to national currencies is not an option. It remains to be determined if the euro is a currency strong enough to increase its international role.
The positive balance of the Euro in the last 10 years, and its key role in managing the recent crisis, heralds a positive future for the euro, including a significant strengthening of its international role. However, the currency is not stronger than one might suppose. Its international role is largely subordinated to the dollar and its future is conditioned to the need for coordination and harmonization of the countries in the euro area.
Tags: Global GDP, European construction, Maastricht Treaty, euro zone, stabilization,
[...] Since 2000, the global economy has gone through a more or less strong turbulence, and the euro has undoubtedly played the role of a "shield", which helped alleviate some of these shocks. The recent crisis has demonstrated the virtues of protecting and stabilizing the Euro. But while the Euro has brought such protection, it is because it is not just a common currency, but has become a currency with an international presence. B. The future of the Euro is becoming more favorable: The successive announcements of possible accession to the Eurozone and its performance against the dollar, point to a strengthening of the indisputable international role of the Euro. [...]
[...] This discrepancy is largely explained by the almost exclusive use of the dollar for trading in commodities. On the other hand, as an invoicing currency, the Euro is mainly used in intra-European trade, while the rest of the world still largely prefers the dollar. The dollar also remains the preferred currency in foreign exchange transactions, the debt market or in international bank deposits. It is still the main anchor currency, and only 30% of countries whose currency is pegged to another currency, use the euro as the anchor currency. [...]
[...] "The euro market has expanded considerably since the early 2000s and is now a safer source of funding for all companies and governments of the world, so that its size now exceeds that of the dollar.” This speech of Jacques de Larosiere, the then adviser to the President of BNP Paribas, expresses quite clearly the desire to see the Euro surpass the dollar. Indeed, the aspiration of one day creating a single European currency which would be able to compete with the privilege of the U.S. [...]
[...] The euro area is thus less attractive than the U.S., particularly in terms of international investment. "The problem is not that the euro is strong; it is that the dollar is weak." Indeed, the weak dollar, which characterizes the phase from 2002 to 2008 during which the Euro has continued to rise to over $ 1.6 in April 2008, is due to several factors, including the slowdown of U.S. economic activity, marked by the slowdown in consumption, deteriorating employment and a widening trade deficit. [...]
[...] The lack of harmonization between the fiscal policies of member states, and insufficient coordination between the ECB's monetary policy and fiscal policy is at the heart of the challenges for the future of the Euro. The creation of an optimal currency area and the implementation of an effective European policy mix are necessary to ensure the future of the Euro, not only as the largest international currency, but also as the money creating growth and economic stability. Though if the abandonment of the Euro appears unlikely, it is not yet free from questions about the adequacy of its performance in the coming years. [...]
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