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Macroeconomic Environment of Business: Eurozone - Term Paper Example

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This paper seeks to address whether the expected advantages of the euro as a single currency for Europe was achieved, while in the process. After its inception, problems have arisen and actual disadvantages were experienced especially in the microeconomic area. …
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Macroeconomic Environment of Business: Eurozone
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Download file to see previous pages The euro was introduced in the financial market back in 1999. It is the culmination of the three-stage European Economic and Monetary Union (EMU) which aims to coordinate economic policies. There was a three-year transition period and, after, national currencies from participating countries ceased to exist. Today, states seeking membership to the European Union must adopt this currency as a requirement within varying timetables in the span of ten years based on specified economic factors. The United Kingdom and Denmark, however, is exempted to this policy.
Ideally, there is a list of economic advantages in using euro in the European Union. Foremost of this is that it is said to be a tool for political solidarity. On the economic front, the following are some of the most important output:
As mentioned beforehand, problems not previously anticipated emerged with the introduction of the euro. For instance, a minimal rise in inflation was expected only during the transition period, but until now, Europeans are complaining about skyrocketing prices in commodities. On a more general scale, we have also a report by the Centre for European Policy Studies that the euro is responsible for Italy's plunge into a full-blown recession. (Browne, 2005) In Germany, the euro is also believed to have failed in invigorating employment statistics or curb rising prices, insolvencies and general stagnation of the economy. Not just economic managers but senior government officials have floated around the idea of a return to national currencies as a way out of their current economic woes. What is worse, unofficial currencies are currently being circulated in some parts of Germany to replace the euro in business transactions. Vissol (1999, p. 75) tells us that "the short term economic benefits accruing to consumers through the transition to the euro concern only the minority of consumers who travel and/or cross the borders." He argued that the long term benefits are uncertain and difficult to put across unless an explanation could be given on how the euro will guide the future payment community as a sovereign community and a value system shared by the vast majority. 
At present, the global economy is recovering but the Eurozone is lagging behind, posting a meager 1% growth. The Germans are fearful of losing their jobs; Italy is on recession while inflation is high. So one might say, there is more than a hint of failure here and the euro is in the thick of things. While officials are running around Europe trying to dispel the rumor that the euro is going down the drain, economic managers' prediction and finance ministers' slips show otherwise or at the very least express trouble. ...Download file to see next pagesRead More
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