Europe is comprised of many countries all with their own language, culture and currency. Until recently, the continent was also subdivided into a "West" and "East" with the Soviet Union the dominant economic and military force over the Eastern bloc. Today, that has all changed, serving to further complicate Europe's plans for unifying the continent along economic and, as a result, monetary lines, by 1992. The purpose of this paper will be to discuss the euro-currency market in Europe and its role in the economy of these diversified countries, including its structure, mechanics and the current legal environment. In addition, the review will address the trends and future plans for the currency system in light of the drastic political changes taking place in the once-communist countries of Eastern Europe.
With a population of 320 million, the European domestic market (meaning Western Europe) is larger than any other industrialized market in the world (Seipp, 1989, p. 300). However, its power has not been realized due to the existing barriers between countries. Goods, people and currency are affected by this array of barriers or restrictions.
The first official recognition of these encumbrances came following the end of World War II when the International Monetary Fund (IMF) and the World Bank were established to assist in the reconstruction of Europe (Solomon, 1981, p. 383). Six of the leading countries then formed the European Economic Community (EEC) in 1957 as a mechanism for doing business, such as creating customs union and a common commercial policy. Members were to gradually eliminate internal tariff barriers to bring about a uniform tariff system for imports from other countries and to allow free movement of labor and capital. Further, social security systems and wage rates were to be standardized.
In 1979, the now-twelve member ECC established the European Monetary System (EMS). Prodded by economic and politic...