COPYRIGHTED MATERIAL
unstable is often a sign of economic problems within the country. Fortunately, the U.S. is a politically and economically stable country, which makes the dollar a strong and desirable currency. Because of this stability, the U.S. attracts a great deal of investment from overseas, which increases demand for the dollar. While the value of the dollar may occasionally fall against other currencies, it rarely remains weak for long. Hello, Euro! Following the chaos of WWII, a bunch of European countries got together and formed the European Economic Community (EEC) . For about 50 years, member countries worked together for a peaceful, united, and prosperous Europe. One of the major impediments to European commerce was that every country, big and little, had its own currency which was not accepted in the other countries. So many currencies! The French Franc , The Italian Lira , The British Pound , the German Deutschmark , the Swiss Franc …Even the tiny 0.2 square mile Vatican City (which is in fact, an independent country) had its own currency! Multiple currencies made the sale of goods and services, and the transfer of money throughout Europe very difficult, not to mention expensive, since currency exchanges usually involve a fee or commission paid to the bank or agency handling the transaction. All this hindered economic development. So in 1992, the EEC countries reconvened and, via the Maastricht Treaty , formed an economic and political union of 28 member states called the European Union (EU) . It operates as a single market for trade and diplomacy . EU citizens have EU passports, and the EU countries enjoy free movement or people, goods, services, and money. One of the goals of the EU was the creation of a single European currency . In 1999 it introduced the euro . The symbol for the euro is € . The currency code is EUR . The euro is issued and controlled by the European Central Bank (ECB) , which is headquartered in Frankfurt, Germany. Out of 28 EU member states, 18 adopted the euro as their legal tender. They are collectively referred to as the Eurozone and operate as a single economic unit . The euro is the dominant currency throughout Europe, used every day by about 332 million Europeans. It is the second most popular currency in the world, behind the U.S. dollar. Euro and the Eurosceptics The advantages to membership in the Eurozone are many. A single currency eliminates fluctuating exchange rates and expensive currency exchange costs . Since 1999, the overall Eurozone economy has grown and is more stable . Consumers have more choice to travel and shop in other countries. The ECB sets a common monetary policy for all of the Eurozone countries which brings consistency and some commonality of economic goals to the Eurozone countries. Critics of the euro (and of the EU in general) are called Eurosceptics . They believe that a single currency has caused a lack of competition among the Eurozone countries. Eurosceptics also bemoan the common monetary policies set by the ECB which apply to all Eurozone countries. They believe the one-size-fits-all- Eurozone-countries monetary policies are inappropriate. For example, what may be an effective policy for Greece, may be ineffective or even harmful for Belgium. Eurosceptics also believe that the protective oversight of the ECB enables some countries to be less fiscally responsible than they ought to be . SLIDE 5J PRODUCT PREVIEW
76
Lesson 5 | Crazy for Currency
Made with FlippingBook flipbook maker