Identify and discuss the costs and benefits of joining the Economic and Monetary Union (EMU)? Do the benefits outweigh the costs?
“EMU is seen as a mean to recover some influence over European monetary affairs.” (François Mitterrand, 1992) The idea of an EMU appeared in the Werner Report in the 1970s in which France has played a major role. Indeed, the French social democraticpresident François Mitterrand wanted the European Union and its member-states to have a stronger influence in the world compare to the US dollar which has been widely used as the standard measurement for all currencies. This has led the president of the European Commission at time, Jacques Delors, to turn the idea into a concrete proposal. Advocators of EMU stressed that it is essential to create astronger European Union with greater economic, political and social cohesion; however others do( didn’t ) not support this stage of the European Union’s construction such as the United-Kingdom, Denmark and Sweden.
In Europe, the existence of different national currencies was considered as the remaining barriers for a barrier-free single market and the influence of the dollar pressed theEuropean Union (EU) to form an Economic and Monetary Union (EMU). The EMU is a type of trade block involving a single market and a common currency. At the European scale, it involves a single European market within its borders and the adoption of the Euro.
Economists usually refer to the EMU as an economic trade off between perceived benefits and cost of joining the area. There are a divergingviews on the extent of these costs and benefits, and therefore, especially on the question whether to join the EMU or not. The aim of this paper is to analyse the key issues surrounding the EMU, positively as well as negatively. The case for or against the EMU requires a careful analysis of the economic pros and cons at both national and firms level.
In this paper, we will demonstrate that the prosmainly address ……. while cons refer to ….. we will conclude
Only a more integrated Europe will be able to exercise leadership on the global issues facing the world economy and compete with the US. Indeed, there are many benefits that a country will have by entering EMU. Recently, the euro has gained a lot of influence since many European nations have adopted it. The growingimportance of the euro in international trades and the increasing trade activities which result from adopting the currency clearly shows that benefits will outweigh costs. Indeed, for most countries international trade is fundamental in order to have a stronger economy. However, the “antis-EMU” advocate that the process will submerge the individuality of the European nations in an “unwieldyfederation, hobbled by bureaucracy, commanding little popular support and imposing a crippling burden of regulatory and other costs on Europe’s economies” (David Currie, 1997, pp.14) They believe that an organized Europe will be negative for most member states as it will also “reduce the volume of trade and would certainly increase the level of unemployment” (Martin Feldstein, February 20, 2008).
Inorder to join the EMU, a country must correspond to the Maastricht Convergence Criteria: price stability, sustainable public finances, exchange rate stability and durable convergence. The term “convergence” refers to the process of unifying technological and non-rival domains, preparing late countries in terms of structure and institutions to catch with those at the forefront. The fulfilment ofthese criteria should be durable. One of the first obvious benefits is that the implementation of those criteria represents a factor of macroeconomic stabilisation and sustainable economic growth for both EMU countries and future members. However, the convergence requirements are also a clear example of conflict because they are considered as lacking economic rationale and imposing unnecessary pain....
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