EMU and the UK essays

EMU and the UK essays The idea of a single currency has already been mentioned in 1957 when the European Union was founded. During the following years several discussions about a Monetary Union took place, but without any achievements. The first steps towards the EMU were only made in 1992, when the members of the EC met in Maastricht. A timetable for the development of the EMU was created there. In the years after the treaty the preparation began. In 1999 exchange rates were irrevocably fixed and transactions started to be possible in Euros. The Eurozone consisted of 11 member states at this time, Greece became the 12th member in 2001. In December 2001 inhabitants of the Eurozone could get so-called "starter-kits" containing Euro-coins. In January 2002 also banknotes were introduced and in March 2002 the national currencies became invalid. (Barber and Naimark, 2001) Since the foundation of the European Monetary Union in 1992 there have always been arguments for and against a single currency. Despite all criticism the Euro is reality in twelve countries now. This fact has both advantages and disadvantages. The most obvious positive argument for the Euro is that transaction costs are saved. This concerns people who are travelling abroad within the Eurozone, but above all firms that import or export to other EMU countries. (Wren-Lewis, 2001) For firms that import or export much the transaction costs are sizable and are partly passed on to consumers through higher prizes. (Eudey, 1998). So, through the single currency consumers will get better prices. Estimations say that through the Euro 0,5 % of EC's GDP (Stavridis et al., 1996) or $ 30 Billion per year (Salvatore, 2002) will be saved. Another important fact is that the single currency eliminates the exchange-rate uncertainty.This should increase trade, as exchange-rate risk means a hidden cost on the transaction. (Eudey, 1998) Research has suggested that the Euro will boost trade by the factor of three...