Evaluate the success of European monetary union to date Essay

Evaluate the success of European monetary union to date - Essay Example In the years that it has been in existence, the euro has widely grown to be recognized as an international currency, and thus, it has enjoyed benefits of the world’s stable market and endured the times of instability. The first idea that gave birth to embryo of the European Monetary Union can be traced back to R. Mundell’s theory of optimum currency areas of 1961 and that of R. McKinnon of 1963. However, it was until 1978 that an idea on the European Monetary System was proposed (Overturf, 1997 p. 14). The proposed European Monetary System (EMS) had various components that included; financial support mechanism (FSM), European Monetary Cooperation Fund (EMCF), exchange rate mechanism (ERM), and the European currency union (UCU). From the inception, the implementation of the European monetary Union in itself was a major triumph. As the ambitious program began to be operational, the countries that were under the union realized many benefits and costs, and in some instances, experienced serious flaws. In a real sense, unification of the currency helped to enhance the condition of the single market since it permitted all transactions to be conducted in one single currency. In that case, application of a single currency helped to improve competition among the member countries and also made the entire European economy to be more compatible with the global market. Because competition among the member states was enhanced, the consumers benefitted immensely because they had a wider range of choice, better quality, and reduced prices. The use of a single currency also helped to attract foreign investment, particularly in areas that were least developed. The use of a single currency within the European countries has ensured stability and positive inflation in most of the years that it has been under operation. The concept of money, as a means of measurement, can assist in