This research examines the potentialities and pitfalls of currency unification in Europe. Some of the history of the currency unification movement is discussed along with its economic and political ramifications. Special attention is paid to its impact on Germany.
Economic integration in Europe has been a major component of change in the Western world since the end of World War II. One of the ultimate goals of the regional arrangements is the establishment of a single currency and central bank among participating countries. Although trade barriers have been diminished, and labor and capital are relatively free to move about the region, the conditions necessary to establish a common currency have been difficult to meet.
The problems associated with currency unification are complex and involve a variety of interrelated institutional, economic, and political considerations. Foremost among these problems are the sheer number of currencies which would have to be unified. there is still no evidence to conclude that the European economic and monetary union (EMU) is either a certainty or that it is not likely to be realized. Of the potential membership (15 in number), Finland, Germany, Ireland, and Luxembourg appear to be strong candidates. Far several others--Greece, Italy, Portugal, and
In the present European multi-currency situation, there is a wide array of exchange rates between European currencies to take the strain of the economic imbalances which arise between EU member countries. Over the past few years, for example, the D-Mark-lira rate has been even more volatile than that between the D-Mark and sterling. If the only important exchange rate in Europe were that between sterling and the unified EU currency, all economic strain would focus on it. Instead, Europe is proposing unifying all these currencies into one currency--the "euro." This unification of currencies offers both benefits and problems for European countrie...