EUROPEAN BUSINESS- ENLARGEMENT - Essay Example

education, culture and disposition), and access to banks and financial institutions. Costs of buying and selling currencies (that is, the service charges of financial institutions in providing foreign currencies to a business) is eliminated in a common market, because only one currency is used. The distorting effects of exchange rate differences are eliminated in a single market. The single currency makes trading easier, since the value of the product in a unified currency is easy to assess. When a firm invest in other countries, it becomes wary that there may be a sudden economic shock that would cause unexpected changes in the exchange rate.

This is eliminated in a single-currency market. Since there is political unity in EMU, the chances of war and interruption of relations between any two countries are eliminated, making transfer of resources and business transactions between them more stable. Because of greater political and economic certainty, it would be natural for trade volume to increase and costs of transactions to be eliminated. Also, the most efficient suppliers could be sourced, further reducing costs. In the 1980s, economists determined that Germany’s inflation rates were well under control despite its rise in other countries, because the German central bank, the Bundesbank, was independent of the German Government and thus has the duty to resist reflationary pricing policies by the government.

The EMU could ensure the same condition over the common market area. The needs of one part of Europe can have a negative impact on the rest of Europe. This was highlighted in the early 1990s, when the Germans struggled with the economic consequences of German reunification, introducing some instability into the system. In the case of Poland, it appears that there will be increasing stability in the country’s internal economic system with its