European_Common_Market__the_Creation_of_the_Euro

European Common Market: The Creation of the Euro European Common Market: The Creation of the Euro European economics changed significantly with the introduction of the European Union (EU). The later adoption of a single currency, the Euro, under a common monetary system agreement between participating EU countries also affected global economics. The effects are measurable. History of European Union Economic agreements to exchange goods and services between countries, trade agreements, have been common for centuries. Economic trade alliances' primary function is to expand each country's available goods with the cooperation of other countries. Examination of the European Common Market, known as the European Union (EU) demonstrates the benefits, effects, significance, and success of "a remarkable achievement in international cooperation" (Geffert, 2010, p. 1) and the larger, global, economic effect. The European Union (EU), created after World War II, was an alliance between six countries to expand trade, create a single European Market, and to prevent war through close cooperation between European people ("European union", 2009). In 1993 under the Maastricht Treaty the "Copenhagen Criteria" (Tiwary, 2008, p. 1) was established to define membership requirements that included "…stable democratic government which focuses on human rights [;]…an economy…with the ability to handle the inevitable competition [; and]…the ultimate goal of being one common body, economically, socio-politically, and monetarily…" (Tiwary, 2008, p. 1). Member benefits eliminate customs barriers, open public market exchanges, and enable unrestricted movement of migrant workers between countries ("single European market", 2009). Not all European countries are EU members because of choice or qualification. Although there are no trade restrictions with countries outside the EU, by 2009, the EU had 28 member countries that met, agreed to, and benefited from the specific eligibility criteria. Though the EU is a trade alliance, each country operates independently. Until recently, each country used independent monetary systems and issued individual currency. Each country's currency had a different value based on the strength of the country's controlling monetary system. Before a transaction could be initiated, the trade value was calculated by the selling country and the buying country. Using different currency for each of 28 countries required conversion for each transaction, a cumbersome and costly process that slowed economic growth. History of the Euro Successes of the Euro “The dollar has been the dominant currency of the world economy for almost a century for a single overwhelming reason: It had no competition. It is thus clear that the euro provides the first real competition for the dollar since the latter’s ascent to global currency dominance” (Bergsten, pg1). The euro was needed for many reasons. It is easier for the nations of Europe to have one currency than several with some being stronger than others. Changing from one currency to another was a hassle, most important, transaction costs associated with exchanging foreign currencies and hedging against exchange rate risks are eliminated that leads to more foreign trading. Monetary policy and thus the exchange rate can no longer be used for internal stabilization purposes in the EU member countries. The euro will make it possible for Europe to one day has an electronic money system that uses a money card that has personalized ID and programmed value (Badman, 2009). It is shown that after a short period of minor turbulences related to the introduction of the euro, the adoption of the euro brings about a higher real GDP growth, a higher GDP level, more employment, lower inflation, a lower price level and improves public finances in the medium run (Weyerstrass & Neck, 2007) . At first it made the mistake of treating all euro zone countries as homogeneous examples of the European “social model”, ignoring the wide diversity of practice. Since the adoption of the EU and the euro European governments now recognize that for the euro to become a long-term success and not just an experiment they has been the creation of the Single Market (Gale Group, 2010). The European financial markets galvanized both directly and indirectly by the euro itself. It continues to make impressive strides. The euro’s shares have already exceeded that of the dollar denomination of global financial assets excluding derivatives (Gale Group, 2010). The euro is a major currency. It makes the euro a strong place where residents in euro zones are more prosperous and this had made it more beneficial for euro citizens to conduct worldwide trade. Countries in the European community have seen major production companies investing in Europe. The euro has also made it cheaper for euro tourists to travel abroad, the numbers of tourism into the euro zone as increased. As the euro as a major currency it has made it easier for companies to trade and good levels of foreign inward investments from company trading primarily outside of Europe (Bergsten, 2005). Conclusion The development of the European Union, European Common Bank, and the Euro demonstrate how a common market, central bank, and common currency facilitate trade between countries. In turn, economic dynamics are affected globally as competition, trade, workers, supply, and demand extend beyond previous boundaries. References Badman, R. (2009). Why the euro has been a success for Europe. Retrieved from http://www.helium.com Bergsten, C. F. (2005, April 27). The Euro and the World Economy. The Eurosystems, the Union and Beyond, 1(2005), e.g., 4-9. European Union. (2009). In The hutchinson unabridged encyclopedia with atlas and weather guide. Retrieved from http://www.credoreference.com/entry/heliconhe/European-union Gale Group. (2010). Future of the Euro. Retrieved from http://find.galegroup.com/A65862117 Geffert, J. A. (2010). [Peer commentary on the paper "Syllabus" by ]. Retrieved from Tiwary, R. S. (2008). European union & its expansion. Research Starters: Academic Topic Overviews, 1-10. Retrieved from http://web.ebscohost.com.ezproxy.apollolibrary.com/ehost/results'vid=6&hid=10&sid=a528863b-e9d9-42d4-9e69-84ef972149a0%40sessionmgr14&bquery=(JN+%22European+Union+%26+its+Expansion+--+Research+Starters+Business%22)&bdata=JmRiPWU2aCZ0eXBlPTAmc2l0ZT1laG9zdC1saXZl Weyerstrass, K., & Neck, R. (2007). Macroeconomics Consequences of the Adoption of the Euro: The Case of Slovenia. Vienna, Austria: Institute of Advanced Studies.