The Challenges of a Single Currency for Multiple States
When the plan to unify Europe through the adoption of a single currency was created, it ran into any number of major obstacles. Charles Wyplosz (1994) noted that the European Union (EU) and its member states found that exchange rate realignments, the possibility of monetary speculation, and the need for new currency controls to be among those challenges. Later, after the euro was introduced in the EU, Wyplosz (1998) stated that sharing currency had created a situation in which countries were no longer able to fix their economic problems by devaluing national currency. In addition, questions of whether or not the euro has achieved meaningful prize harmonization (one of its goals) are still unanswered (Gumbel, 2004).
Consequently, it is important to examine the macroeconomic and microeconomic challenges that impact upon the introduction of a single currency whhch will be emplnyed in a number of quite different states. It was anticipated, for example, that the euro, after its introduction, would be competitive as a currency with the dollar, but Gumbel (2004) stated that this has not occurred. The euroÆs ability to foster economic growth and to eliminate barriers to the flow of investment in the EU is another area that is worthy of consideration. The ideal of a single currency such as the euro suggests that it will limit inflation, reduce national deficits, and foster improved investment and employment for all participants (Gumbel, 2004). Whether this occurs is a different consideration.
Gumbel, P. (2004). Is the euro good for Europe? Time
Wyplosz, C. (1994). Hurdles to monetary union in Europe.
Wyplosz, C. (1998). Making the euro work. Time
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