European Currency Essay Example | Topics and Well Written Essays - 1500 words

European Currency - Essay Example To reflect on the future of the European currency, it is necessary to consider first steps to the European Monetary Union; the reasons of occurrence, problems of creation and functioning of new model of the European currency system. "In its 1990 White Paper, the European Commission argued that deeper economic links would be a major goal of EMU, and many observers accept the view that the elimination of exchange rate risk and the lowering of transaction costs will indeed deliver more integration" (Wyplosz, 2001: 9). It is necessary to understand what we should expect from euro in the future, whether it can make a competition to dollar in the world currency markets, and may be even to replace it as a reserve currency in many countries. Interest to the given questions is caused by the point that introduction of new currency has no analogues not only in the Europe, but also all over the world. The given event needs to be considered as movement aside bipolar world currency system that creates preconditions for redistribution of forces on a global scale. On January, 1st, 1999 within the limits of the European union (EU) are created the European Economic and Monetary Union and the uniform currency for the member-states of European Economic and Monetary Union named euro, which during the certain period of time has replaced national currencies of the corresponding countries. This event is natural, rather important and in the certain sense the closing stage in the development of the West-European integration process, the beginning to which was put with the Treaty of Rome signed on March, 25th, 1957 on creation of the European Economic Community ("the Common Market") in structure of six countries: France, Germany, Italy, Belgium, Netherlands, and Luxembourg. Since then the process of integration in the Europe, despite of considerable difficulties and contradictions in general successfully developed as in breadth (with 6 up to 15 countries), and in depth (in direction to an overall objective - to formation of uniform economic space, in wh ich it would be carried out, irrespective of national borders, free movement of the goods, capitals and people, and in which would operate equal for all subjects of economic activities conditions of competition). The principle of the Common Market, on which the European Economic Community was based, assumes for the free movement of the goods and the capital if not the general currency, but at least significant stability of rates of exchange. Instability of rates of exchange did conditions of competition uncertain and for this reason destabilized trade relations. Besides, stabilization of rates of exchange is necessary for coordination of economic policy of the Union member-states. EMU, the decision on which creation was accepted on December, 5th 1978 has started to operate on March, 13th, 1979. It included Germany, France, Holland, Belgium, Denmark, Ireland, and the Great Britain, Italy, Greece, Spain, Portugal and Luxembourg have joined later. EMU establishes the base for measuring costs, intended to become money - European Currency Unit (ECU), and a system of stable, but ordered rates of exchange between the countries of European Economic Community. "The rapid development of the ECU in private markets had been a surprise. By March 1986, European banks held ECU assets worth 61 billion and ECU bonds of 7 billion. Private banks also had established a