The Euro: Why is it So Weak?
A single currency has always been a dream for many European countries, as it would symbolise stability and unity, both economic and political. The Euro was launched in 1999 amid much Euro-phoria. Many people believed that the Euro would replace the dollar as the main international currency: a medium of exchange, store of value, and unit of account. Not only that, but they also believed that it would also be used as the main shipping currency, especially within Europe. Saddam Hussein even hoped that the Euro would spell an end of the US dollar's reign, and the US's supremacy, and played his part in promoting the Euro by pricing his oil exports in Euros. It is many peoples opinion that a single market would be hard to maintain without a single currency. The economic benefits of the Euro and ECB are as follows. Firstly, efficiency gains arise as the single currency removes the need to hedge against foreign exchange risk when dealing within the Euro zone. The second benefit is greater macroeconomic stability as the single monetary policy from an independent central bank provides European countries with an environment of price stability. A single currency should result in lower interest rates,
5. The ECB has positioned the Euro well for its launch. Two weeks before the launch, Euro zone interest rates were set at 3% and the European Central Bank stated that there was to be no reduction in the immediate future. The reasoning behind this was to help give the Euro a strong position in the first six months, leaving the US as the only economic power with the option to boost world trade by lowering interest rates. If this were the case, it would put pressure on the already vulnerable dollar. It's was widely believed that the US is headed for a recession, and if that still is the case, the dollars current strength is only temporary and when the economy crashes, or at least returns to normal, the Euro will return to a higher and more stable level.
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Approximate Word count = 2074
Approximate Pages = 8 (250 words per page double spaced)
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