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The Eurozone: Advantages and Disadvantages

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by

Lisa Kindred

on 23 April 2014

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Transcript of The Eurozone: Advantages and Disadvantages

The Eurozone: Advantages and Disadvantages
Benefits of the Euro
High degree of price stability
Disadvantages of the Euro
Loss of national sovereignty
European Central Bank
Role of the ECB
One Currency For All
Presented by
Barry's Angels

Abdoulaye Barry, Lisa Kindred, Jo Tudisco Guntert, Amanda Weeks
18 eurozone member states
7 February 1992
1 January 1999
1 January 2002
The idea is put into action
European leaders signed the Maastricht Treaty, setting up the EU and decided upon a firm timetable to adopt a single currency
The countries that decided to adopt the euro spent the following years preparing for this
economic convergence
The transition continues
The Euro was launched as a "unit of account" for financial operations of paper, but was not yet available as cash
This gave each country's financial systems time to adapt to the new currency
Here comes the cash
Banknotes and coins were launched in the countries that were adopting the Euro
ATMs only gave euro, shops only gave euro as change, and after a short period of time all the old national currencies had been collected by shops and banks and removed from circulation
national legislation
compatibility with the treaty
proper conversion of goods
keep citizens informed
7 non-eurozone member states
2 opt out member states
More price transparency
Removal of transaction costs
As stable as the best-performing currencies previously used in the euro area countries
Inflation expectations have been kept low
Payments can be made with the same currency
Makes travelling in the eurozone much easier
No exchange rate fluctuations
Made it possible to save a lot of money
Stronger economies vs. Weaker economies
Example: Greece and debt crisis
Cost of introducing the currency
Very significant one off cost
British Retailing Consortium estimates that British retailers would have to pay between £1.7 - £3.5 BILLION to make the necessary changes
Has deflationary effects
Strict deficit and inflation caps can force countries to deflate their economies
EU's response to the crisis
State of the Eurozone today
Will the Eurozone break up?
Greece returns to the bond market
Mario Draghi
Challenges to overcome
Introduction of stricter financial discipline in the sphere of public finances
Adoption of stricter policies for risk management in the financial sector.
Implementation of structural reforms among Eurozone members
Full transcript