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Euro Currency: A Case Study

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Nevertheless, the US dollar is followed by a competing second candidate currency : the Euro. The Euro is the currency shared by 17 member states of the European Union (EU). Around 330 millions EU citizens now use it as their currency and enjoy its benefits, which will spread even more widely as other EU countries adopt it. It is therefore not surprising that the Euro has rapidly become the second most important international currency.
In this section we will assess the possibility for the euro to become a dominant global currency rivalling the U.S. dollar in the future ; and in the same time see what impact the euro crisis has had on the Euro as a currency.

As a result of the creation of a single trading market and the formulation of the single …show more content…

The first is that the EA still has a very fragmented banking and capital market, which makes it more difficult to fully exploit economies of scale and of scope and network externalities. The second is that the EU and the EA are only unions of independent nations and not a federal state, consequently it will be extremely difficult to overtake the US dollar and maintain a dominant international role while the governance and institutions of the EU and EA remains unchanged. Indeed, countries inside the EA share the same currency, but they do not have a stated common policy regarding the economy. Therefore the EA is far from being a true monetary …show more content…

This is a very important distinction. In the long run, investors tend to favour stability over temporary strength, because by definition they are, on average, risk averse. The European debt crisis and the current ongoing disputes within some members of the EU has impacted the euro negatively as it is at the opposite of prooving stability of the currency. In effect, events which started in Greece are having a domino effect on the rest of the Eurozone. And it is not only the ‘PIGS’ that are experiencing economic difficulties, other European countries such as Italy have since added to the deterioration of the Eurozone economy (Mason, 2011).
But some positive outcomes of the euro-crisis cannot be ignored. It has raise consciousness within the EU resulting in greater seriousness in the Union. For example, Grece has been clearly accepted in the EU in a very slight way : today its integration within the EU would not be possible without major changes within its

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