On the 1st of January 1999, the euro went into circulation as a common currency for eleven of the fifteen European Union countries, with Greece joining in 2001. France joined in 1999. The ratification of the Maastricht treaty in November of 1993 provoked the creation of the European Monetary Union. Apart from making travel easier; this single currency makes very good economic and political sense. Indeed, using a single currency increases price transparency, eliminates currency exchange costs, and makes international and intra euro area trade easier. Therefore, it gives the European Union (and consequently France) a more powerful voice in the world. It is also a logical complement to the single market which makes it more efficient, now the EU can compete with the "Two bigs" (United States & Japan). The size and strength of the euro area also better protect France from external economic shocks, such as unexpected oil price rises or turbulence in the currency markets. However, the euro also has several drawbacks. All the countries belonging to the euro area are not equal in term of prices. The French economy is facing economic crisis and lower exportations since 2008. Why did the euro increase trade across borders within the euro zone? What are the main costs and benefits for the French economy?
[...] As a conclusion, joining monetary union has represented a major turning point for the French economy. The move to a common currency for all EMU members had both positive and negative consequences. Clearly the benefits outweighed the costs, or France would not have adopted the euro. The introduction of the euro means that foreign trade within the euro area partner countries can now be conducted in a common currency. As a result, there are no longer any exchange rate risks, and transaction costs are reduced. The launch of monetary [...]
[...] That's why a single currency makes France a strong partner to trade with and facilitates access to a single market for foreign companies, who will benefit from lower costs of doing business in Europe (and consequently in France). That is an advantage for shareholders, who have access to larger and more liquid financial markets. More recently, the introduction of the single European currency, the euro, has sped up the process of trade integration by removing exchange rate uncertainty and increasing transparency and competition across markets. [...]
[...] Rather than having to set up separate accounting systems, and banks for transactions in countries other than their native one, the euro makes it simple to operate from a single central accounting office and use a single bank: the European Central Bank. It is a precious gain of time. What's more, with the Euro, there is no longer any risk of fluctuation between currencies. Interest and inflation rates are much lower. Indeed, because of the decrease of exchange rate risk, the Euro permits lower interest rates. [...]
[...] Export prices were very high, and companies were discouraged from exporting within the single market. These exchange costs were estimated at billion to billion per year in the EU, much of it incurred as companies transferred goods, people and capital around Europe. With the euro, these costs have disappeared in the euro area, and this money is now available for more productive investment. Uncertainty is eliminated. The euro gives a large boost to the integration of financial markets across the euro area. [...]
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