Economic Advantages of the Eurozone Currency
The Euro: Advantages of a Single EU Currency
Key Benefits of the Eurozone Currency
Enhanced Price Stability in the Euro Area
The euro is as stable as the best-performing currencies previously used in the Euro area countries. This has established an environment of price stability in the Euro area, exerting a moderating influence on price and wage-setting. As a consequence, inflation expectations and inflation risk premiums have been kept low and stable. Even in the more challenging current environment, price stability in the Euro area has not been jeopardized.
Greater Price Transparency for Consumers
Payments can be made with the same money in all countries of the Euro area, making travel across these countries easier. Price transparency is good for consumers since the easy comparison of price tags makes it possible for consumers to buy from the cheapest supplier in the Euro area, e.g., cars in different Euro area countries. Therefore, price transparency created by the single currency helps the Eurosystem to keep inflation under control. Increased competition makes it more likely that available resources will be used in the most efficient way, spurring intra-Euro area trade and thereby supporting employment and growth.
Elimination of Cross-Border Transaction Costs
The launch of the euro on 1 January 1999 eliminated foreign exchange transaction costs and thus made possible considerable savings. Within the Euro area, there are no longer any costs arising from:
- buying and selling foreign currencies on the foreign exchange markets;
- protecting oneself against adverse exchange rate movements;
- cross-border payments in foreign currencies, which entail high fees;
- keeping several currency accounts that make account management more difficult.
Reduced Exchange Rate Fluctuations and Risks
With the introduction of the euro, exchange rate fluctuations and therefore foreign exchange risks within the Euro area have also disappeared. In the past, these exchange rate costs and risks hindered trade and competition across borders.
Understanding the European Union’s Institutions
Describe the functions of the EU’s main institutions. To what extent has the Lisbon Treaty solved the EU’s institutional problems?
European Parliament
The principal democratic component of the EU system, composed of members directly elected by Europeans. Its job is to bring the concerns and priorities of European citizens into the system and to represent their political views in accordance with the outcome of the elections. Together with the Council, with which agreement must be found, the European Parliament is responsible for examining, amending and passing EU legislation and setting the EU’s annual budget, based on proposals from the European Commission. It also supervises the Commission, holding it to account for the way it implements EU policy and spends taxpayers’ money from the EU budget.
Council of Ministers
The institution representing the governments of EU countries in the EU system, composed of the relevant national ministers for the subject under discussion. Together with the Parliament, with which agreement must be found, the Council of Ministers examines, amends and adopts passes EU legislation proposed by the Commission.
European Commission
The “executive” of the EU system, the European Commission is responsible for proposing new EU laws to the Parliament and the Council and for implementing those laws once passed. The Commission also implements EU policy on a day-to-day basis and manages EU programs and actions in Europe and across the world. The Commission is composed of one commissioner from each EU country, each holding a specific policy portfolio, and is led by a President from among their number.