Title: Single Currency: Pros a& Cons
Headings: Advantages and Disadvantages of a Single Currency.
Advantages and Disadvantages of a Single Currency.
Content: Lower transaction costs, elimination of exchange rate fluctuations, and price transparency will give incentive for firms to expand their markets within the single currency area. This would also generate investment and employment. A more stable currency. The Euro would be more stable, that is, experiences less exchange rate fluctuations when compared to national currencies because the "value" of Euro reflects the average economic conditions of the whole Union and not that of a single national economy. Moreover, Euro would enjoy more credibility because it is used in a larger currency zone. At the end of 2011, 17 countries in EU used Euro as legal tender. This credibility is enhanced by the stability pact of December 1996 that commits participating nations to fiscal responsibilities like limiting budget deficit and debt ratio to levels that are acceptable by the pact. The stability of Euro is also protected by the explicit stability-oriented monetary policy of European System of Central Banks (ESCB) that controls the value of Euro. Prevent competitive devaluation by nation states. A single currency would prevent the need for nation states in EU to devalue their national currencies to achieve competitive edge over other nation states.