The History of the Euro Currency
Brexit is undoubtedly a hot topic and the consequences and future of the UK and the Euro are present in the minds of many for reasons varying from principle to financial opportunity. There is great history behind the Euro and its currency; a glimpse into this fascinating history is worthwhile and can make understanding the current climate and situation clearer.
There’s much to the story of the Euro and the impact the currency has had on the world and the political scene. With it being the accepted currency for the majority of members within the European Union, the “Eurozone” as it is called spans a range of significant countries that enjoy a high GDP and presence in the global political landscape.
Let’s go through a brief history of the formation of the Euro currency and some of the challenges and benefits experienced since its introduction.
The benefit of the EU and its currency
Why did the EU come to be? While a complex question in itself, it’s a fair statement that the European Union was brought to be due to the political and also economic benefits available through such close collaboration.
This was a particularly tempting course of action as the countries within Europe are in some cases smaller and less significant as individuals, unable to enjoy the benefits of trade and politics available to larger countries. By joining together and sharing a single standard currency for most members, the EU is able to negotiate, trade and manoeuvre on the global stage in a way never before possible.
The need for a strong Europe was further reinforced following the events of the Second World War – more than ever, Europe had to stand together in principle and politics in addition to growing as one through the use of a unified currency.
So we can see why the EU is beneficial. Greater trade and the easing of border restrictions as well as collaboration on important laws such as those governing human rights are easy to understand. But why the Euro currency?
It’s largely to do with trade. The change to a single shared currency makes the sharing of goods and services between countries far easier. It also allows countries within the EU to support each other financially in a more agile and fluid manner – with a single currency able to be transferred between country accounts there is less to worry about in terms of EU members having different exchange rates based on their current financial status or performance.
The Maastricht Treaty
Let’s take it back to 1992, the year of the Maastricht Treaty. It was this treaty that formally laid out the plans and requirements for countries moving to the Euro currency. Interestingly, the EU didn’t want everyone in on the deal! The strongest members of the EU in financial terms were the most sought after, and for good reason – flooding the currency with poorly performing countries would mean the currency was weak from the outset. The Maastricht Treaty was a delicate legal premise where the goal was to create a currency that would be shared by countries of relatively similar GDP and economic power.
This resulted in the most suitable and willing of EU countries entering into the EMU – the European Economic and Monetary Union. Although dates vary due to countries making the switch at different times, it is considered that the Euro was created as a formal currency in full effect in the year 2002.
Did it work?
A complicated answer, to say the least! Measuring the effectiveness of the Euro is as fascinating as it is complex. It’s undeniable that to some extent the Euro brought benefit to the EU through the provision of a stable manner in which to trade and share wealth. It was not, however, without its difficulties and drawbacks. Some countries such as Germany have been impacted negatively due to the inability for them to individually alter their interest rates so as to help boost growth within the country when it was best to do so.
Many agree that the Euro has accomplished its goals – the EU has risen to prominence on the global stage with support of a currency that has lowered administrative difficulties within its own borders. With the Euro ensuring ease of trade and the smooth exchange of wealth, the members of the EU have been granted greater focus and flexibility in facing the opportunities and challenges that lie in its path.
There are opportunities available for those willing to monitor and invest in the future of the EU.
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