The Euro is a currency that is adopted by most of the European countries and is the second largest currency in the world after dollars. Out of the 28 European countries, 18 of them use it as their national currency and one major country not using it is the United Kingdom. The European Union countries that adopted this currency together form a region called the Eurozone and is the world’s largest economic regions. The currency which includes notes and coins started in circulation in 2002.
Administration of the Eurozone
The European central bank manages the Eurozone and is the sole authority to make policies about the Eurosystem on behalf of all the EU countries. It is led by a board which consists of heads of the central bank of Eurozone countries which collectively decide on the monetary policies. Notes and coins are printed only by the ECB.
Eurozone interest rates. The other major task of the ECB is to keep a check on the inflation, though the local situation is different in different countries individual countries cannot decide on monetary policies. For fiscal integration, national budgets of EU countries are peer-reviewed post the financial crisis in the global economy in the year 2008.
Advantages of Euro
Euro currency was initially seen as a tool for political solidarity, but it also has great economic benefits for the countries that have adopted Euro as their national currency. Some of them are:
- Transparent pricing: Having transparent pricing is beneficial for both consumers and producers alike. When the currency is common in European countries, it is easy for price comparison and makes it helpful to produce cheaper products as businesses can source cheaper materials, and consumers get the price advantage. When the prices are equal, the consumer can decide whether the deal is good or bad and buy them accordingly.
- Transaction costs are less: When there is a single currency the cost of changing currencies is less and hence useful for tourists in the Euro region. Since the tourism industry adds up to 1% to the GDP, it is quite significant to the countries. As per a few studies, adoption of Euro and other factors has increased tourism by 6% due to less cost in changing currencies.
- No fluctuations in exchange rate: The volatility of exchange rates greatly impacts exports. There is less confidence in investors which impacts the profits. Having a single currency will boost the confidence of both the businesses and the investors and thus leads to better trade. The single currency helps the business because the cost incurred due to the exchange in currencies from other EU countries is not required and helps the economic welfare. This would help the medium-sized businesses for investment and growth. Moreover, the cost transparency along with no exchange rates results in better Eurozone trade.
- Less inflation: Eurozone is committed to maintaining low inflation and those countries that have had a history of high inflation has benefitted from this move. Due to not having exchange rate issues and rate fluctuations, the euro offers lesser interest rates.
- Billing is Simpler: Payments and billing for products are easier with Euro.
Euro is a best and widely used currency and the adoption of Euro has helped many eurozone countries have better economic growth. In spite of the huge difference in opinion, Euro has helped all the Eurozone countries to stay united a sense of oneness!