Europe In 2010 :: essays research papers

Economic and Monetary Union ( emu) is a single currency area within the European Union single market in which people,goods, services and capital move without restrictions. It creates the framework for economic growth and stability and isunderpinned by an independent central avow and legal obligations on the participating Member States to pursue soundeconomic policies and to coordinate these policies very closely.As trade between the EU Member States reaches 60% of their total trade, EMU is the natural complement of the singlemarket. This market will work more than efficiently and deliver its benefits more fully with the removal of full(prenominal) transaction costsbrought about by currency conversions and the uncertainties linked to exchange rate instability. EMU and the economic performance of the Euro area will have their largest international effects on neighboring economies inwestern Europe and on developing and transition countries with important trade and financial links t o Europe, includingcountries that link their currencies to the Euro. Among emerge market economies, those likely to be most affected are thetransition countries of the central and Eastern Europe and the Baltics.The global environment has been favorable in a number of respects for the transition to EMU and the achievements of itsobjectives. The strong demand for euro-area exports from industrial countries at more advanced stages of the business cycleand the depreciation of the currencies of euro area countries everywhere the past four years fostered a strengthening of growth in theeuro area and helped to offset the effects of the Asian crisis. There are also challenges for EMU in the global economic environmentThe crisis in Asia and other emerging market economies could produce adverse spillover effects and make the monetarypolicy more difficult to carry out. The continuation of the crisis could result in weakening of the external demand, which, in turn, could dampen confidenceand domestic demand. The financial market volatility could gain the uncertainty in assessing the economic indicators. The economic crisis in emerging markets could influence the commercial banks in the euro- area to make substantialprovisions for non-performing loans. THE FUTURE OF EUROIt is, of course, hopeless to predict the properties of the behavior of the exchange value of the Euro. With regard to broadtrend, it seems likely that the Euro will tend to appreciate against the U.S. dollar and pound sterling over the contiguous few years, butdepreciate against the Japanese yen when Japans economic recovery begins. The United Kingdom and the United States have