The Most Interesting EventThe progress of the Euro was the most interesting event occurring throughout this period. Never before has a currency united so many powerful economic nations. It is very interesting to see the progress it has made and changes it has influenced.
In 1991 it was decided that the Euro would be introduced. It officially became the currency of eleven European nations: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Spain, shortly thereafter. Although the actually hard currency will not be introduced until January 1, 2002, it is possible to trade and complete transactions using this currency. This introduction allowed for a single money supply throughout most of Europe, caused increased transparency of prices and stocks throughout the nations adopting it and encouraged long-term investments between firms in different countries by eliminating exchange rate risk.
Despite these benefits, the launch of the Euro has not gone as successfully as planned. Since it’s introduction the Euro has lost almost one third of it’s value compared to the dollar. This devaluation has the potential to create a large negative effect on European markets. To take control of the situation government intervention was deemed necessary.
In early September, the European Central Bank lowered interest rates for the sixth time in less than a year, in hopes of initiating a rise in the value of the Euro. Despite these efforts the value of the Euro continued to falter. Then in late September central banks from many powerful economic nations collaborated in a major invention effort. The banks spent billions buying Euros to increase their demand while simultaneously selling dollars and yen. This effort seemed to have work as the Euro finally stabilized. This invention was an important step because a weak Euro would cause investors to lose confidence in the new currency. In addition it created a risk of increased inflation because of the increased expense of imports. However, the Euro is still not out of danger because many analysts feel that the reason that it is performing so poorly is because of the decreased amounts of investments in Europe as other markets, the United States in particular, continued to flourish. This is a long-term problem that the central banks will be unable to fix. Then in November as there were signs of slowing economic growth in the US the value of the Euro started to increase. By late November many businesses were acquiring a preference for the Euro because of the benefits it provided. According to one article, “The Euro has revolutionized corporate strategy and transformed approaches to doing business in Europe.” It makes life much easier for European people, businesses and investors as it creates a single European market. As you can see in just a short period the impact and effect of the Euro drastically changed. It will be interesting to see what will happen in January 2002 when the actual hard currency is put into circulation. No one knows exactly what impact this will have but it will be exciting to see just how this will stir up the European economy as well as economies throughout the world.
The Most Interesting EventThe progress of the Euro was the most interesting event occurring throughout this period. Never before has a currency united so many powerful economic nations. It is very interesting to see the progress it has made and changes it has influenced.
In 1991 it was decided that the Euro would be introduced. It officially became the currency of eleven European nations: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Spain, shortly thereafter. Although the actually hard currency will not be introduced until January 1, 2002, it is possible to trade and complete transactions using this currency. This introduction allowed for a single money supply throughout most of Europe, caused increased transparency of prices and stocks throughout the nations adopting it and encouraged long-term investments between firms in different countries by eliminating exchange rate risk.
Despite these benefits, the launch of the Euro has not gone as successfully as planned. Since it’s introduction the Euro has lost almost one third of it’s value compared to the dollar. This devaluation has the potential to create a large negative effect on European markets. To take control of the situation government intervention was deemed necessary.
In early September, the European Central Bank lowered interest rates for the sixth time in less than a year, in hopes of initiating a rise in the value of the Euro. Despite these efforts the value of the Euro continued to falter. Then in late September central banks from many powerful economic nations collaborated in a major invention effort. The banks spent billions buying Euros to increase their demand while simultaneously selling dollars and yen. This effort seemed to have work as the Euro finally stabilized. This invention was an important step because a weak Euro would cause investors to lose confidence in the new currency. In addition it created a risk of increased inflation because of the increased expense of imports. However, the Euro is still not out of danger because many analysts feel that the reason that it is performing so poorly is because of the decreased amounts of investments in Europe as other markets, the United States in particular, continued to flourish. This is a long-term problem that the central banks will be unable to fix. Then in November as there were signs of slowing economic growth in the US the value of the Euro started to increase. By late November many businesses were acquiring a preference for the Euro because of the benefits it provided. According to one article, “The Euro has revolutionized corporate strategy and transformed approaches to doing business in Europe.” It makes life much easier for European people, businesses and investors as it creates a single European market. As you can see in just a short period the impact and effect of the Euro drastically changed. It will be interesting to see what will happen in January 2002 when the actual hard currency is put into circulation. No one knows exactly what impact this will have but it will be exciting to see just how this will stir up the European economy as well as economies throughout the world.
Economics Essays
